How applying for a credit card affects your credit score

Applying for a credit card usually triggers a hard inquiry, which typically lowers a FICO Score by less than five points and stops counting after a year. The bigger long-term effects come from what happens after approval: how much of your new credit limit you use, and how the new account changes the average age of your accounts.

Here is what actually moves your score when you apply, and how to check your odds without any hit at all.

What goes into a FICO Score

FICO groups credit report data into five categories. Knowing the weights helps you see why one application is usually a small event.

Inquiries sit inside the smallest categories. As myFICO puts it, inquiries play a minor part in only 10% of what makes up a FICO Score, and on-time payments and overall debt matter much more.

Hard inquiries vs soft inquiries

When you apply for credit, you authorize the lender to request your credit report. That request is recorded as an inquiry, and there are two kinds.

Hard inquiries happen when you apply for credit. Experian says each credit card application will likely result in a hard inquiry. Lenders who review your report can see them, and they can lower your score.

Soft inquiries happen when credit is checked for reasons other than a new application. Examples include viewing your own credit report, prequalification checks, promotional offers and insurance checks. Soft inquiries do not affect your scores.

How much a hard inquiry costs

For most people, one additional inquiry takes less than five points off their FICO Scores, according to myFICO. Experian reports a similar figure for FICO and cites a drop of five to 10 points for VantageScore.

The impact is larger for some people. myFICO notes inquiries can matter more if you have few accounts or a short credit history. Many inquiries at once also signal risk: people with six or more inquiries on their reports can be up to eight times more likely to declare bankruptcy than people with none, per myFICO.

How long inquiries count

There are two different clocks, and people often mix them up.

• On your credit report: hard inquiries stay for up to two years.
• In your FICO Score: they only count for 12 months.
• In VantageScore: Experian says hard inquiries from the prior 24 months can be considered.

Experian adds that the score impact of a hard inquiry usually lasts just a few months under both FICO and VantageScore models.

Rate shopping doesn't apply to credit cards

For mortgages, auto loans and student loans, FICO groups multiple inquiries within a 14- to 45-day window into one, depending on the scoring version. That lets you shop for the best rate.

Credit cards don't get this treatment. Experian says applying for several cards in a short period isn't considered rate shopping, so each application counts as a separate hard inquiry. myFICO also notes that opening several new accounts in a short period represents greater risk, especially for people without a long credit history.

Utilization: often the bigger effect

Amounts owed make up about 30% of a FICO Score. A key part of that is your credit utilization: the share of your available revolving credit you are using.

myFICO explains that when a high percentage of available credit is in use, it can signal that you are overextended. A new card affects this in two directions.

Say you have one card with a $5,000 limit and a $1,500 balance. These are example numbers.

If you keep balances steady, the extra limit can help. If the new card leads to more spending, utilization rises and that can outweigh the small inquiry hit many times over.

Average age of accounts

Length of credit history is about 15% of a FICO Score, and FICO considers the average age of all your accounts.

A new account starts at zero months old, so it pulls the average down. Example: if you have two cards that are 8 and 4 years old, your average age is 6 years. Add a new card and the average drops to 4 years.

This effect fades as the new account ages. It tends to matter most for people with only a few, fairly new accounts, the same group that feels inquiries most. If that describes you, see our guide to building credit.

Prequalification and preapproval

Many card issuers let you check whether you are likely to qualify before you formally apply. Experian says prequalification typically uses a soft inquiry and gives an idea of your eligibility without affecting your credit score.

Two things to keep in mind:

1. It is not a guarantee. Experian describes prequalification as giving an idea of your eligibility. The formal application, with its hard inquiry, decides approval and the actual terms.
2. The soft inquiry still appears. You can see it on your own report, but it doesn't affect your score.

Prescreened offers in the mail

Offers marked "prescreened" come from lenders who asked a credit bureau for a list of people meeting certain criteria. The Federal Trade Commission says prescreening doesn't hurt your credit score.

If you would rather not get them, the FTC says you can opt out for five years at optoutprescreen.com or by calling 1-888-567-8688, or opt out permanently by also returning a signed form.

How to apply with the least impact

1. Check your own credit first. Viewing your own report or score is a soft inquiry and doesn't hurt your score.
2. Use prequalification tools where available to narrow your choices.
3. Space out applications. Since card applications aren't grouped, several in a short period add up.
4. Keep balances in check on the new card so utilization stays low.
5. Pay on time, every time. Payment history is the largest factor, at 35%.

Applying may not make sense right before a major loan, such as a mortgage, when your score can affect the rate you get. It is also worth pausing if you have several recent inquiries already.

Bottom line

A single card application usually costs a few points for a few months, and FICO stops counting the inquiry after a year. The larger and longer-lasting effects come from how you use the card: keeping utilization low and paying on time can more than offset the inquiry, while extra spending can do far more damage than the application ever did. Check prequalification first, space out applications and treat the new credit limit as room to breathe, not room to spend.