New credit cards.. how do they affect credit score

[lovesny]

My husband and I both applied for and received the Southwest Chase credit card and received the 50,000 points towards air travel. We only applied for it for the rewards part, and do not plan on overspending on it.

In surfing the web, I see that Discover offers a $150 cash back reward for applying for their card -- provided you spend $1000 during the 1st 3 months. We are not ones to apply for cards just to get the rewards, but since we will be spending the month of Feb. in Fla, we could easily charge our condo fees on this card and reach our $1000.00 obligation. And of course, the $150 cash back would be great.

We always strictly pay off our cards each month, so we are sure that we can manage having multiple cards.

However, we have to wonder how this affects our credit scores. Anyone know??

 

[ValpoCory]

We only applied for it for the rewards part

...

We are not ones to apply for cards just to get the rewards

That sounded funny.

But as far as your credit score, you should be fine in 6 months. The general rule is don't open any new lines of credit if you need to apply for a mortgage in the next year.

 

[JDUCKY]

The initial hard inquiries will ding your score for a few months. After 12 months, hard inquiries no longer affect your FICO.

Your score might rise overall, though. If your utilization was higher before the new card and the new credit limit drops that overall utilization down significantly (the sweet spot being about 5-7% for most) then your score would likely rise.

But, your score may drop if your Average Age of Accounts dropped significantly due to this new tradeline. But, for one new account to affect you that badly, you'd have to have very young accounts and very few of them.

Typically, one or two new accounts will not hurt your score and will help overall as those lines age (and as long as you keep balances at or near 0).

Also note that having more than half of your accounts carrying a balance will also hurt your credit score. So, if you have 5 open credit cards, carrying a balance on 1, 2 at the most, would be more ideal, score-wise.

 

[lovesny]

Yes, I guess that did sound funny about applying for the rewards point. Actually, that is the only reason I want to apply for these cards. I have no intentions of charging anything but the absolute minimum required. We are cash-paying people and always pay off any charge bills each month.

Our home is paid for. We have no outstanding car loans. We are just retired folks who like to travel. So, I'm thinking, why not apply for the Discover card and get the rewards cash.

 

[DISdreamin']

What PP said....

From what I've read, if you have a long credit history that is squeaky-clean and you open a new card (or even a couple) in a short period, it will have a relatively small impact. Open a bunch and it raises flags and lowers your score.

FWIW, we refi-d our house, financed a car and opened a new cc all within about a month of each other last summer and our FICO scores stayed pretty much the same. Lots of hard inquiries involved there, but the score stayed pretty solid (the ones we could see moved, but only a few points).

 

[ValpoCory]

Our home is paid for. We have no outstanding car loans. We are just retired folks who like to travel.

Then you do not have to worry about your credit score at all. Your credit score only matters when you are about to take out a big loan (mortgage, car loan, home equity line of credit, etc). But that does not seem to apply to you.

 

[DISdreamin']

Then you do not have to worry about your credit score at all. Your credit score only matters when you are about to take out a big loan (mortgage, car loan, home equity line of credit, etc). But that does not seem to apply to you.

Actually things like insurance rates can depend on FICO scores, too. I see soft pulls from our insurance company periodically.

 

[ccgirl]

The initial hard inquiries will ding your score for a few months. After 12 months, hard inquiries no longer affect your FICO.

Your score might rise overall, though. If your utilization was higher before the new card and the new credit limit drops that overall utilization down significantly (the sweet spot being about 5-7% for most) then your score would likely rise.

But, your score may drop if your Average Age of Accounts dropped significantly due to this new tradeline. But, for one new account to affect you that badly, you'd have to have very young accounts and very few of them.

Typically, one or two new accounts will not hurt your score and will help overall as those lines age (and as long as you keep balances at or near 0).

Also note that having more than half of your accounts carrying a balance will also hurt your credit score. So, if you have 5 open credit cards, carrying a balance on 1, 2 at the most, would be more ideal, score-wise.

It's percentage on each card. It would actually be better to carry a balance of less than 50% on 3 cards than maxing out 1 card.