Jeff Overs—BBC News & Current Affairs via Getty Images
By Jeanine Skowronski / Credit.com
August 22, 2016

There are lots of good reasons to want a credit card. They offer better fraud protections than other payment methods, provide liquidity in case of emergencies, and, in some cases, even reward people for their purchases in the form of points, miles, cash back or ancillary perks. Plus, when used responsibly, that little piece of plastic can work wonders for your credit score.

Of course, when used irresponsibly, a credit card can have the opposite effect. Missed payments and high balances can cause scores to plummet. And there’s one more thing people paying close attention to their credit may find themselves worrying about. As one commenter recently asked: “If I apply for a credit card, won’t my score go down?”The short answer: Maybe, but that shouldn’t necessarily dissuade you from filling out an application. Let’s break down the issue.

How a Credit Card Application Can Ding Your Credit

One of the five main factors of most credit scores (because, remember, you have more than one) is your history of searching for credit — essentially how frequently and how recently you’ve applied for new credit lines. Your performance in this category, which generally accounts for 10% of your credit scores, is largely based off of how many hard inquiries you have on your credit report (the less, the better). Hard inquiries are generated when you go shopping around for credit. So, yes, that credit card application can hurt your score.

Read: Which Credit Card is Dead Weight In Your Wallet?

But here’s the thing: a single hard inquiry isn’t going to cost you very much. In fact, it’s likely to drop your score by less than 5 points. And that ding can be swiftly negated by any positive impact that the new credit limit has on your credit utilization rate (the amount of debt you owe vs. your total available credit). Credit utilization comprises a whopping 30% of your score. So, if that new card has a high limit and you keep all of your balances low, you could actually see your score improve after adding the plastic.

Apply Carefully

That’s not say you can — or should — go around and fill out an application for every credit card under the sun. While many credit scoring models do treat inquiries for the same type of financing made within a certain frame as a single application, that rule doesn’t always apply to credit cards. And lots on inquiries can add up.

Read: 1 in 5 Customers Are Carrying the Wrong Credit Card

Plus, even if your score doesn’t incur lots of damage due to a particular application, the mere existence of multiple inquiries on your credit report could be viewed as a big red flag to lenders. (The idea here is that the cardholder may be taking on more credit that they can handle and money woes are afoot — or ahead.)

Protecting Your Score

If you’re considering new credit, it’s a good idea to see where your credit stands before filling out any applications. This will let you know if your score can handle a small hit. (Added tip: inquiries can be particularly problematic for folks teetering on specific credit thresholds, so if that application could potentially take your credit from good to fair or, worse, fair to bad, you may want to hold off on that application. You can learn more about what constitutes a good credit score here.)

Read: How to Apply for a Credit Card When You’re Unemployed

And it’ll also give you a good idea of whether or not you should be able to qualify for a particular card. That’s important since it will help you avoid incurring an inquiry only to be rejected for the new credit. Remember, you typically need stellar credit to qualify for the better credit cards on the market.

You can also pull your credit reports for free each year to see how many inquiries are listed. By law, inquiries remain on your credit reports for two years, but only inquiries in the last 12 months factor into your credit score.

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