BACK

Expert Q&A

How a new credit card affects your credit score

Summary

A reader accidentally” applied for a new Costco American Express card and believes that it might hurt her credit score”

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

 

Question for the CreditCards.com expert

Dear To Her Credit,
I’m not sure what to do. A checker at Costco asked me if I wanted a Costco “gas card” that earned a 3 percent rebate, and I went for it. I filled out the paperwork in a hurry and must not have paid too much attention — I ended up with an American Express card that doubles as a Costco membership card. I don’t want it if it will hurt my credit score! Can I avoid having it hurt my score if I don’t activate it? Should I call or write and cancel it?

I have really good credit now and am afraid to mess it up! — Emily

 
Answer for the CreditCards.com expert

 

Dear Emily,
Getting a new credit card — on purpose or inadvertently — affects your credit score three ways. You’re likely to see a change in your score based on a new credit inquiry, an increased number of open accounts, and the change to your available credit utilization ratio. Here’s how each affects your score:

 

  • New credit inquiry. Your credit score may have taken a minor ding — 7 points or so — when you applied for the card. That’s not likely to change your life or your ability to get credit, and within a few months the ding goes away on its own. Besides, what’s done is done — closing the account now won’t help.
  • Increased number of open accounts. If you already had plenty of credit cards (most people don’t need more than two or three), you could find one more pulls your score down slightly. Again, this shouldn’t be a big deal unless you start collecting a lot more cards.
  • Available credit ratio. Your total credit score may have actually improved if you now have a better ratio of credit used to credit available. You should try to use no more than 50 percent of your credit limit at any time, even if you pay the balance every month. The available credit on your new card may make that easier, provided it doesn’t tempt you to spend more and use it up.

 

Your credit score isn’t the only thing affected by one more card, however. Consider:

First, does the credit card come with a fee? If it does and you don’t want to pay, you might try to back out of it. Annual fees are not always bad; for instance, if the 3 percent rebate on your gas far outweighs the fee. I personally don’t mind paying $50 for a card that occasionally lets us fly to Hawaii for free.

If you have more accounts than you can keep track of, say half a dozen or more, that’s another problem. Every card means another statement, another due date not to miss. With a stack of cards, someone could steal one or you could leave your card at a restaurant, and you might not miss it for days or weeks.

Another factor to consider is whether you tend to spend more when you have more cards. If you’ve been paying by cash, check or debit card at Costco, you’ve had to keep good track of how much you’re spending as you cruise the aisles or you’ll come up short when you check out. With a card, that’s less urgent. You could spend hundreds of dollars when you thought you were there for eggs and dog food. It all goes on the card so easily.

If you’re a disciplined shopper, however, you’ll find an American Express card very convenient even if Costco is the only place you use it.

It’s wonderful that people are becoming more aware of how their actions affect their credit scores. However, it’s possible to worry too much. One new card won’t make that much difference. Decide whether to keep your new card based on what’s best for your total financial picture, not just on how it affects your credit score.

See related:Understanding how credit scores work, Credit inquiries and your credit score, Obsessing over your credit score, How many credit cards do you need? There’s no perfect answer

 

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Expert Q&A

Charge card balances won’t impact a FICO credit score

Although the balances on credit cards are used in the calculation of credit scores, that isn’t the case for charge card accounts.

See more stories
Credit Card Rate Report Updated: September 23rd, 2020
Business
13.91%
Airline
15.48%
Cash Back
15.94%
Reward
15.78%
Student
16.12%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.