Does Applying For A Credit Card Hurt Your Credit Score?

Applying for a credit card can cause your credit score to drop temporarily – but only because of the hard credit check conducted during the application process. If you pay your balance off each month and use your credit card responsibly, your credit score will bounce back from the dip.

Your credit score might drop after applying for a credit card

Opening a new credit card can be exciting and make things feel shiny and new again. But it also adds more responsibility and will kick your credit score a little bit. That’s because credit card issuers will pull your credit score in what’s called a hard inquiry.

This gives card issuers a complete picture of your financial history – including when you’ve applied for credit in the past. It also means that this credit card application will show up on future credit reports.

Fortunately, hard checks usually fall off your credit report after a year or two. As long as you don’t frequently apply for credit, your credit score should recover.

How applying for a new credit card can help your score

Getting approved for a new credit card helps your credit score by lowering your credit card utilization ratio – that is, the amount of credit you have available increases, which decreases the total percentage of credit you’re using overall.

Remember: This won’t apply if you open a new credit account and then max out the card.

How applying for a new credit card can hurt your score

We’ve already mentioned how a hard credit pull can temporarily harm your score, but there are other ways that a new credit card can ding your credit:

• A new card will lower your average credit age, which will have a temporarily negative effect on your credit score
• If you rack up debt on the new card, your credit utilization ratio can actually increase, which will negatively affect your score

To protect your credit score, keep your card in good standing by only spending what you can pay off each month. Don’t carry a balance, which will start to accrue interest and can easily spiral into unmanageable debt.

6 things to consider before you apply for a credit card

Here are a few things to think about before you decide to add some shiny new plastic to your wallet.

1. Your current credit score

If your credit score is less than ideal, it’s a good idea to work on improving it before applying for a new credit card. Here’s how credit scores in Canada are classified:

• 760 – 900: Excellent
• 725 – 759: Very Good
• 660 – 724: Good
• 560 – 659: Fair
• 300 – 559: Poor

If you’re set on getting that new card and willing to put the work in to improve your score, here are a few tips:

• Pay your credit card bills on time, every time
• Keep your credit utilization (the percentage of your credit you use) under 30% – anything higher and and your score starts to decline, as it can be seen as a sign of financial stress
• Make more than the minimum payment every month

2. Your credit report

We all make mistakes – even the credit bureaus. Review your credit report every year to ensure there are no errors on your account. Even catching a small mistake and correcting it can have a significant impact on your score.

3. Your current balance

If you’re carrying a large balance on a credit card you already have and you’re not paying it off every month, chances are you’re spending more than you’re bringing in. Make smart money moves by budgeting your spending and putting only what will bring in extra rewards on your credit cards.

4. Your payment history

Set up a reminder on your phone, download a bill reminder app – anything to make sure you pay your bills on time every month. Nothing hurts your credit score faster than missed payments.

If you can, pay more than the minimum payment to make a dent in your balance – not just the interest.

5. Your existing credit cards

While it might be tempting to close the account of that student credit card you got when you were 18, give it a second thought. Keeping cards with a lengthy history is good for your credit score! As long as you’re not paying an annual fee and use it occasionally, it will work in your favour.

6. Your income

The easiest way to get denied for a credit card? Overstating your income.

Look at your last T4 and truthfully use that information. Even adding a couple thousand could stand in the way of you and your new card.

Plus, while the bank does care how much you make (since it shows your ability to pay off your balance), they also care about your character. Things could look fishy if you’re lying about how much you make.

Cards with great welcome bonuses

If you’ve considered your finances and credit score, you might still be interested in a new card. Here are a few of our favourites (with great welcome bonuses!) to start you off.

	Annual fee	Welcome bonus	Earn rates	Apply
American Express Cobalt Card	$155.88, charged as $12.99 monthly	Up to 15,000 bonus points (terms)	* 5 points per $1 spent on eligible groceries and restaurants * 3 points per $1 spent on eligible streaming services * 2 points per $1 spent on eligible gas, transit, and ride share purchases * 1 point per $1 spent on foreign currency purchases * 1 point per $1 spent on all other purchases	Apply
BMO AIR MILES World Elite Mastercard	$120, first year free	$150 GeniusCash + Up to 9,000 bonus miles, first year free (terms)	* 1 Mile for every $12 spent * 3x the Miles for every $12 at participating Air Miles partners * 2x the Miles for every $12 spent at any eligible grocery, liquor, and wholesale stores	Apply
Scotia Momentum Visa Infinite Card	$120, first year free	$20 GeniusCash + 10% cash back for the first 3 months, first year free (terms)	* 4% cash back on groceries and recurring bill payments * 2% cash back on gas and transit * 1% cash back on all other purchases	Apply

FAQ

Does the bank know how many credit cards I’m applying for?

Yes, a credit card issuer will see how many inquiries have been made on your account. If you have too many inquiries in a short period of time, the bank could see it as a red flag. Try to space out your applications to improve your odds of getting approved.

Will getting denied for a credit card hurt my credit score?

Getting approved or denied doesn’t affect your credit score – only applying for credit impacts it. Plus, no one who accesses your credit report can see if you were approved or denied.

Do prepaid credit cards affect your credit score?

Despite their name, prepaid credit cards do not affect your credit score. With a prepaid card, you load your own money onto the card before spending it. They aren’t credit products and therefore do not have any impact on your credit rating.