Will a Credit Card Application Change My FICO Score? 

You’ve probably heard the rumor. Completing a credit card application can have an impact on your credit score. It doesn’t matter whether you actually get the card in question or how you use it if you do. The very act of applying for credit will harm your score. 

Is it really true or is this just some sort of personal finance urban myth? Will a credit card application really change your FICO score?

Although there is enough truth to the argument to de-justify filling out every application you see, the impact of application-related inquiries is probably less significant than you’ve been led to believe. 

Your FICO score, for instance, is based on five different kinds of information. Thirty-five percent of your score, for instance, is based on your payment history. Another thirty percent of the number stems from the amounts you owe to creditors. Along with the length of your credit history and the types of credit you’re using, FICO also looks at what they term “new credit”. New credit accounts for a mere ten percent of your final score. 

Credit inquiries stemming from credit applications are evaluated under that new credit umbrella. That means they’re worth a fraction of ten percent with respect to your overall score. FICO isn’t giving away the details of their “secret recipe” but it’s probably safe to say that credit card applications are less meaningful in assessing credit worthiness that how many new accounts you’ve actually established. Credit agencies undoubtedly recognize that people may apply for new cards as a means of securing lower interest rates on balance transfers, too. So, it would be wildly generous to assume that inquiries constitute even half of the ten percent involved with new credit.

So, at most inquiries are going to comprise five percent of what matters with respect to your credit rating.  A new credit card application represents only a fraction of the total number of inquiries regarding your credit, which would seem to further reduce the significance of inquiries on your rating.

Don’t let the fact that a new application might show up on your credit report scare you away from pursuing a good offer. If you’re worried about your score, of course, you’ll want to be a little more cautious. However, everyone should recognize that their numbers are based more on other considerations and that applying for an additional line of credit probably won’t make a substantial difference in how agencies calculate their overall creditworthiness.

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