Opening a new credit card might seem like a smart financial move, whether you're trying to earn rewards, increase your credit limit or make a big purchase. But before you submit that credit card application, make sure you understand how it might affect your credit profile.

Let’s take a look.

Understanding Credit Inquiries

When you submit a credit application for a new credit card, the card issuer will check your credit history by pulling your credit report. This process triggers a hard credit inquiry – or what’s known as a “hard pull” – which is recorded on your credit file. Lenders use this information to decide if you qualify for the credit product, such as a secured credit card or a standard credit card.

Hard inquiries may affect your FICO score by a few points, causing a slight drop in your overall credit score. This may prompt you to ask, "Does applying for a credit card hurt credit?" The short answer is: yes. But the impact is usually both small and temporary – if you manage it correctly.

Soft Inquiries vs. Hard Inquiries

When it comes to credit checks, there are two main types of inquiries: soft inquiries and hard inquiries. Understanding the difference between the two is important because they each affect your credit score in different ways.

Let’s start with soft inquiries. A soft inquiry happens when you or someone else checks your credit information without your actively applying for credit. For example, when you check your own credit report – which is something you should do regularly – or when a lender pre-approves you for a credit offer, they issue a soft inquiry. Soft inquiries are essentially harmless: they won’t drop your credit score, and they don’t show up on your credit reports as visible to lenders.  These inquiries are part of your routine financial health check, just like tracking your payment history or keeping an eye on your credit utilization.

But hard inquiries are a little different. A hard inquiry happens when you’re actually applying for a credit product, like a new credit card account, loan or mortgage. Unlike soft inquiries, hard inquiries are visible to lenders and may cause your credit score to drop slightly – at least temporarily. This happens because a hard inquiry signals to lenders that you're seeking new credit, which may indicate potential risk. Typically, a hard credit inquiry lowers your score only by a few points. For most people, this slight drop is temporary, and the overall impact is small – especially if you’re responsibly handling credit card accounts and other credit lines.

In short, soft inquiries are your friends—they’re safe and don’t affect your score. Hard inquiries, though, need to be managed with care. Apply for credit only when you really need it, and be mindful of how hard pulls can add up over time.

Impact of Hard Inquiries on Your Credit Score

When you apply for a new credit card or loan, a hard inquiry is added to your credit file, and this may mean your credit score drops by a few points. But don’t worry – this drop is usually both temporary and small.  A single inquiry by itself generally won’t hurt your score.

The real key is how you're managing your overall credit accounts. If you’re using your credit card responsibly, making on-time payments, and maintaining a healthy payment history, a hard inquiry’s effect will be minimal. If you maintain good habits, like keeping your credit utilization low (ideally below 30 percent of your credit limit), the small drop from a hard inquiry won’t have much of a negative impact on your overall profile.

Another important thing to remember is that while hard inquiries are reported to credit bureaus and stay on your credit reports for up to two years, their impact on your score typically fades after just a few months. By that time, other factors, like your credit mix (the variety of consumer credit products you have, such as loans and credit cards), available credit, and average account age, start to play a bigger role in how your score is calculated.

But here’s something to watch out for: if you apply for several credit cards or loans within a short period of time, your credit report will show multiple hard inquiries, which can signal risk to lenders and cause a more noticeable drop in your score. If you're thinking about opening several credit cards for rewards or combined purchases, it’s better to space out those credit applications to keep from accumulating too many hard inquiries at once.

Temporary Nature of Credit Score Reduction

Even though a hard inquiry can cause a slight dip in your credit score, its effect is usually temporary. The drop in your score is just one part of your overall credit profile, and as long as you properly manage any new credit card account, your score should quickly recover. Factors like your average account age may also influence how much your credit score drops after opening any new account.

The key to minimizing a hard inquiry’s negative impact of is to avoid opening too many new credit accounts within a short period of time. If you apply for multiple credit cards in quick succession, lenders may view this as risky behavior, which could lead to larger dips in your credit score.

How Multiple Inquiries Are Treated

If you’re shopping for several credit cards or submitting multiple credit card applications within a short period, your score could drop further. This is because hard inquiries affect your credit differently when applying for credit cards versus loans like mortgages or auto loans, where multiple inquiries are treated as one.

However, hard inquiries from credit card applications don’t combine the same way, so applying for too much credit in a short time frame could signal that you're taking on too much credit, which might negatively impact your score.

Mitigating the Impact of Credit Card Applications

There are some strategies you can use to limit negative impacts of applying for credit. The breaking news is that managing credit card applications wisely can actually improve your credit score over time One smart move is to look for pre-approval offers before officially submitting your application. A pre-approval or pre-qualification involves only a soft inquiry, which means checking won’t hurt your score. Once you know you're eligible for a card, you can confidently move forward with your application, knowing you're likely to be approved. Before applying, consider whether the card has an annual fee, which can add to your overall costs.

Another way to mitigate the impact of applying for credit card accounts is to keep your overall credit health in good shape. Credit utilization – or how much of your available credit you're using compared to your credit limit– plays a big role in your credit score. To keep this ratio low, try not to max out your credit cards and aim to pay off your full balance each billing cycle.

If you’re considering applying for several credit cards or need a new credit card account before a big purchase, timing is important. Space out your credit applications instead of submitting multiple credit card applications in quick succession. By allowing time for your credit score to recover between new inquiries, you can avoid the negative impact of having too many hard pulls on your credit reports within a short period.

In addition, think carefully about the type of card you’re applying for. If you're building or repairing your credit, a secured credit card may be a great option because it allows you to start small while building a positive credit history. In addition, many credit cards offer rewards on eligible purchases, which can work in your favor. With responsible use – like making on-time payments and keeping your credit line under control – your history will improve, even if you’ve taken on a new account. If you’re not interested in a secured card, another good option is the Juzt Digital Credit Card, which is unsecured credit card designed for users with no or poor credit – and because it’s a digital card, you’ll have access to it immediately.

Finally, if you're planning a big purchase in the near future, like a car or a home, be especially mindful about spacing out your credit applications and not overspending on other purchases. A slight drop in your score from multiple hard inquiries might make it harder to be approved for favorable terms on a major loan. Responsibly managing your credit and avoiding too many new inquiries at once will help you maintain a solid credit profile over the long term.

Long-Term Credit Score Considerations

Even though a new inquiry and new line of credit may cause a temporary dip in your score, adding a new credit card account can be beneficial in the long run. For example, opening a new credit card increases your available credit, which can help lower your credit utilization ratio—a key factor in determining your overall credit score.

In addition, having a mix of credit products – like revolving accounts (credit cards) and installment loans – diversifies your credit mix, which may also boost your credit score over time. It’s critical to responsibly manage your credit and make sure your credit card accounts stay in good standing to avoid missed payments or other negative factors that could harm your credit profile.

Key Takeaways

Applying for a credit card can cause a small, temporary drop in your credit score because of the hard pull or hard inquiry on your credit report. However, if you’re responsibly managing your credit card and making on-time payments, you can limit the power of negative impacts and even improve your score over time. Just be mindful of your credit applications and how often you're opening new accounts. You might also consider using strategies like pre-approval to minimize the effects of hard inquiries.

In the end, your overall credit profile is influenced by a combination of factors, including your credit history, credit limit and payment history. Managing these elements well can help ensure that opening a new credit card account doesn't hurt your credit score in the long run.

This content is for informational purposes only and does not constitute financial advice. For advice on your specific credit situation, please contact a financial professional.