New Credit cards and credit scores

[Cato]

I heard opening a credit card negatively affects one's credit score in the short run. Does anyone know how many points will it cost your credit score to open a new credit card account? How long until your score recovers?

[drtooth73]

Its not opening, its a credit check by a credit company.
Timewise: a year.
Points: not sure, I guess you are allowed 6 credit inquires a year, anything more and it goes down quick

[boa2]

~4 points per inquiry

[iSellJerseyShore]

The credit bureau system is a secret formula and varies bureau by bureau so it gets tricky. The formulas are protected under tight security.... With that being said, a hard pull, which is an application for credit costs you 5 points from your FICO score. I would imagine applying for credit and opening the card is covered under the same 5 points.

On the same topic..... If you apply for a mortgage through 10 mortgage companies you are covered under the first 5 points, so another words you are not penalized for price shopping. Basically as long as you are shopping the same type of credit through different lenders your score would not be further reduced. This is of course time sensitive, I am not sure what the exact time frame is though....

On the topic of immediate impact, yes your credit is reduced the 5 points as mentioned above. However the score rebounds relatively quickly depending on your credit history and usage of available credit. It's best to maintain a low usage of your credit because the high water marks usually remain in your credit reports. Try to keep the utilization under 50%, this may or may not be possible depending upon your current financial situation/credit score.


Hope this bit of info helps!


-Frankie

[boa2]

Originally Posted by iSellJerseyShore

The credit bureau system is a secret formula and varies bureau by bureau so it gets tricky. The formulas are protected under tight security.... With that being said, a hard pull, which is an application for credit costs you 5 points from your FICO score. I would imagine applying for credit and opening the card is covered under the same 5 points.

On the same topic..... If you apply for a mortgage through 10 mortgage companies you are covered under the first 5 points, so another words you are not penalized for price shopping. Basically as long as you are shopping the same type of credit through different lenders your score would not be further reduced. This is of course time sensitive, I am not sure what the exact time frame is though....

On the topic of immediate impact, yes your credit is reduced the 5 points as mentioned above. However the score rebounds relatively quickly depending on your credit history and usage of available credit. It's best to maintain a low usage of your credit because the high water marks usually remain in your credit reports. Try to keep the utilization under 50%, this may or may not be possible depending upon your current financial situation/credit score.


Hope this bit of info helps!


-Frankie

All true.

And...keep in mind that when you shop for a mortgage, or a car, while the bureaus generally limit your point reduction to ~5 points in a 14-day period (their discretion), it reads at the top of your credit history: MULTIPLE CREDIT INQUIRIES MAY ADVERSELY AFFECT CREDIT RATING

Bottom line is that while the point deduction is minimal, when you shop multiple car dealers, or brokers, numerous (read: unnecessary) inquiries can make you look like more of a credit risk than you really are.

[Cato]

Thank you, fellas!