Will applying for, then canceling, new card hurt scores?

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question Dear Opening Credits,
I know my story may sound a little odd, but I made an unintelligent decision and applied for a credit card online. I realized 30 minutes later that I really should’ve left it alone, so I called and canceled it. Do you think this will hurt my credit score? I have two other cards. One secured and one CareCredit. Both have been paid off and never had have late payments or penalties. I even had paid off my balances in full prior to my first minimum payments. Can you please share with me your thoughts on this manner? I would greatly appreciate it. – Ray


Dear Ray,
Despite your regret, obtaining a credit card online can be a smart move, since you can easily compare the current array of options that are available to you. Then, when you identify a card you both qualify for and like, you can complete the application with just a few clicks. You will often receive an answer in a minute or less.

Of course, the problem with such a rapid process is that you may make a hasty decision. After a quick browse, a deal can look so good that you apply without considering if you really want or need the credit card, or if the card’s interest rate and fees are amenable. It’s a common occurrence. But rather than being disastrous, what you did probably resulted in only a temporary, minor ding.

Anytime you pursue a credit card by submitting an application, you give permission to the credit card issuer to take a deep dive into your credit history. With that information (as well as what you list as your personal financial data, such as your income) the issuer will determine if you’re a good candidate for the card. Even if you don’t qualify, the issuer will send notification that you applied for the card to the three major credit reporting agencies — TransUnion, Experian and Equifax.

Chances are you now have a what’s called a hard inquiry on your credit reports. That notification will remain on your credit reports for two years, but will only factor into your credit scores for 12 months.

Although an overabundance of hard inquiries can negatively impact a credit score (because it is an indication of possible financial desperation), a single inquiry should have very little impact (usually shaving about five points off your scores), especially when it’s balanced out by positive activity. In fact, keeping your balances low or at near zero and paying on time are two of the biggest factors influencing your credit scores.

The longer you’ve had and used credit products while also adhering to the due dates, the better. Not carrying over a substantial monthly balance on credit cards — with no debt being best — will cause your credit scores to soar. Since this is what you’ve done, you have nothing to worry about.

Get a copy of your credit reports now from annualcreditreport.com. There you’ll be able to access all three reports immediately, safely, and at no charge. You can also pull your VantageScore and TransUnion credit report for free from CreditCards.com. Contrary to popular myth, checking your own reports will not hurt your credit scores. Read everything carefully, making sure all is correct. You’ll soon see how that credit card application, as well as any others, is being listed.

Outside of not making any more random applications that you’ll instantly regret, my suggestion is this: keep up the good work. You seem to be using credit cards the right way!

See related: How to cancel a credit card, Will canceling a new, unused card hurt your score?

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Updated: 12-12-2018