Should You Apply for a New Credit Card or Improve Your Credit Score First?

by Lyle Daly | Updated July 21, 2021 - First published on May 17, 2021

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A concerned woman at a laptop holding a credit card

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Making the right choice depends on your credit score and your financial situation.

Sometimes it's hard to decide between applying for a new credit card or raising your credit score. A new credit card could be a valuable addition to your wallet. You may have even found one that will earn you more rewards on your purchases and has other features that save you money.

The issue is that credit card applications aren't helpful when you're working on your credit. An application results in a hard inquiry on your credit file, which can cause your credit score to drop by a small amount. If you're approved for a new credit card, it will reduce the average age of your credit accounts. That can also ding your credit.

You have to figure out whether you'd benefit more from a new credit card or from a higher credit score. Fortunately, there's a simple way to do this.

The magic number: A credit score of 670

The first thing to do is check your current credit score. If you're not sure how, there are several ways to get your credit score for free. Make sure you choose a method that provides your FICO® Score. That's the most widely used type of credit score by lenders.

As a general rule, if you have a FICO® Score of 670 or higher, then you can go ahead and apply for a new credit card. Scores of 670 and above are considered good credit. With that type of score, you can realistically qualify for most of the top credit cards. At this point, your credit score is high enough that you can prioritize opening a credit card that will benefit you.

If your FICO® Score hasn't hit that mark yet, then you should focus on building your credit first. Credit cards for consumers with lower credit scores don't have nearly as many benefits. It makes more sense to raise your credit and then apply for a great card when you can qualify for it.

While that's the general rule, there are a few exceptions.

You're planning to apply for a loan soon

When you have a loan application coming up, it's best to avoid credit card applications, regardless of how good your credit is. Even a small drop to your credit score could result in a higher interest rate on your loan. That can cost you significantly, especially if you're getting a mortgage. The lender may also be reluctant about approving your loan application if it sees that you recently got a new credit card.

You don't have a credit card yet

Normally, you shouldn't apply for new credit cards if you don't have good credit. But you can ignore that rule if you don't have a credit card yet. Credit cards are one of the most effective ways to build credit. By using one regularly and paying the bill on time, you'll improve your payment history, which is the most important factor in your credit score.

In this case, look for a credit card that fits your current situation. For most consumers, credit cards for bad credit are a good starting point.

Your credit card costs too much

While you're building your credit, it usually doesn't make sense to open multiple credit cards. You're better off sticking to one card until you have good credit -- unless your current credit card has unnecessary fees.

Some credit cards that are easy to get are way too expensive. If you're paying a monthly or annual fee for one of these cards, you should see if there are any no annual fee credit cards you could pick up as a replacement. It could be worthwhile to open a new card and close your old one if it's costing you money.

To sum it up, you should usually only apply for a new credit card if you have good credit -- a FICO® Score of 670 or more -- and you don't have any upcoming loan applications. If you don't have good credit, then you should avoid applying for new cards, unless you either don't have a credit card yet or the card you have charges too much in fees.

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