Why is my credit score low after getting a credit card?

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Though a new credit usually helps you improve your credit score, but there are also some situations under which it there’s the possibility of your credit score getting low instead. 

For instance, if you open multiple credit lines in a short period of time, you might notice your credit score dropping, this is because  opening several new credit cards could point towards sign of riskier spending, due to which sometimes opening several accounts within a short time frame could result in penalization. 

Other than this, your credit score can also suffer if your new credit card account leads to incurring more debt. Furthermore, your credit score can also get low due to making late payments because of having multiple accounts.  

Other than this, there are also some other factors that might cause your credit score to become low. Let’s have a look at them. 

Other factors of a new card that can affect your credit score

Here’s how a new card might hurt: 

  • Hard inquiry

Most of the times when you apply for a new credit card, your lender pulls your credit for hard inquiry from one of the three major credit bureaus, TransUnion, Experian and Equifax. Unlike soft inquiry which doesn’t affect your score, hard inquiry can result in a minor fluctuation in your credit score. 

However, there’s no need to worry if your credit score drops due to hard inquire. Luckily, the impact that inquiries have on your credit score are minimal and can be recovered quickly and easily. 

  • Lower average age of accounts

The amount of time for which you’ve had your credit also has an impact on you credit score. The average age of your credit can be reduced if you get a new card. Having a few credit cards has a larger affect than having many.   

However, when it comes to credit scores, the effect of length of credit history can be said to be a rather insignificant factor. It counts as 15% of your FICO score.  

  • Higher balances

You credit score might get affected if you spend a lot frequently, or, in order to have high credit utilization, you get you get a balance-transfer card and transfer your higher-interest debt to the card.  Credit utilization has a huge impact on your credit scores. 

You might find yourself with lower credit scores If you have a high credit utilization on your cards, it also makes it difficult to make bigger monthly payments, and leads to a higher interest rate on your cards due to late payments. 

According to credit specialist you should avoid going higher than 30% on any card, and lower is better. 

How to avoid lowering your credit score?

One way to avoid lowering your credit score is by not opening new accounts too rapidly. If you don’t have a lot of other credit information, then opening new accounts will affect your average account age and make it lower, which will affect your FICO scores negatively. You FICO score can still be affected even if you have used credit for a long time. 

 

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