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Credit Repair

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



Ironically, even when a credit card issuer checks your credit history and approves you, your credit score still drops by a few points. This is because they’ve had to run a hard credit check or inquiry so they could see your full credit history. Every hard check results in a small deduction of points from your score. So, after receiving a new credit card, you could go back to check your score and find it’s lower than before.

A credit card provider will carry out a hard pull on your credit only after you apply for a card (not for preapproval). This means they’ll request your full credit report from one or more credit bureaus, but almost always from Experian, TransUnion, and Equifax (the top three).

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The Number of Points a Hard Inquiry Takes Off Your Score

The good news is that each hard check takes only a few points off your score. This means that small drops in your total, especially if you’ve recently applied for credit, are nothing to worry about. They’re also temporary, and if you continue to use and manage your credit responsibly, your score will go up again.

There’s no direct answer to the issue of by how many points does a hard inquiry affect your credit score. It depends on the frequency of your credit applications. If you’ve applied for several credit cards in a short time, then all those hard checks can take tens of points off. Remember, it doesn’t matter whether you accept the credit offer or not; it’s the hard pull that deducts points – every time.

How To Avoid Hard Checks on Your Credit

Ask to go through the issuer’s preapproval process first. This requires only a soft check, which won’t bring your score down. Of course, getting preapproval doesn’t guarantee you a credit offer if you do make a full application. But it lets you know the probable outcome and allows you to avoid a hard check if it seems like you wouldn’t be successful.
It also helps to know which everyday financial activities require hard checks, so you can go through with them only when you’re really serious. These include applications for a:

  • Mortgage
  • Car loan
  • Credit card
  • Student loan
  • Personal loan
  • Apartment or house rental

Requesting a Credit Increase Can Hurt Your Score

Asking your credit card provider to increase your credit limit can also take points off your score, even if they agree. Why does requesting a credit increase hurt your score like this? – It’s that hard inquiry again.

That said, not every lender will run a hard credit check to see if you meet the requirements. “Credit card issuers aren’t always clear about whether the request will result in a hard or soft inquiry, but some share this information online,” says Experian. They also have some good advice: “If you’re unsure and can’t find the information online, call your card issuer and ask whether it will use a soft or hard inquiry. You can also ask if it’s likely that your request will be approved.”

How Often Does Your Credit Score Update?

Lenders and creditors report new information about your activity to the credit bureaus. The bureaus then update your credit report, usually once a month to every 45 days. Commercial credit scoring systems like FICO and VantageScore then use that to calculate your credit score. You can use a free online tool to check your score for updates as often as you like.

You Can Check Your Report Once A Week

Reading your credit report can help you make sense of updates to your score. If you request your report from any of the credit bureaus, it’s treated as a soft check, so no points are deducted. You’re entitled to a copy of your full report once a year from each of the three main agencies; however, according to USA.gov, owing to the financial hardships of the COVID-19 pandemic, you can now get a free credit report every week through April 2022.

If your score has gone down because of multiple credit card applications, then the solution is to stop applying, at least for now. According to Money, “a string of hard inquiries could signal to lenders that you are taking on too much debt.” Experts advise waiting at least three months between applications, and even more if your score is low. Hard checks stay on your report for two years, but their effect on your credit score should go away sooner than that.

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HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
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Things That Can Stop Your Credit Score Going Up

Building up better credit takes time, especially if you’re starting from a low score. If you’re feeling a little frustrated, “Why is my credit score not going up?”, get a copy of your credit report and check whether any of these issues might be holding you back:

  • Identity theft (spending on your credit card by someone who has stolen your details)
  • A sudden increase in your spending (this decreases the amount of credit you have compared to the amount you’re using)
  • You’ve recently closed a card (this can shorten your credit history and reduce your total available credit)
  • You’ve moved house frequently (some lenders see this as a sign of instability)
  • You’ve paid off a loan and, in so doing, changed your credit mix (loans to credit accounts)
  • You have a financial relationship (e.g., a mortgage or joint bank account) with someone who doesn’t have good credit
  • You owe money on a credit card you’ve forgotten about

Key Takeaways

Knowledge is power when it comes to improving your credit health. If your score is low, you can’t fix it unless you know why.

  • Check your score regularly and request your credit report from all three top bureaus.
  • Make timely payments on the credit cards you already have.
  • Apply only for credit that you actually need to reduce hard inquiries and keep your score as high as possible.

 

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