How Many Points Will My Credit Score Drop if I Apply for a New Credit Account or Loan?

Your credit score can impact whether or not you’re approved for credit in the future at the best interest rate and terms. If you’re doing what you can to protect your credit, one of your questions may be “How many points will my credit score drop if I apply for a new credit account or loan?”

How Credit Inquiries Affect Your Credit

One of the factors considered in determining your credit score is new credit. Applying for a lot of new credit in a matter of months may be a red flag in the eyes of potential lenders because it may be a sign that you’re relying too much on credit cards and borrowed money.

When you apply for a new credit account or loan, your credit will be pulled as part of the approval process. This is called a hard inquiry. Each time someone does a hard inquiry, it’s listed on your credit report and remains on your credit report for two years. Your credit score may drop a few points, usually around five points, when you have one hard inquiry.

Applying for New Credit

The impact of applying for new credit is small and affects you most strongly in the first couple of months after a hard inquiry is done. As long as you only apply for credit when you need it, applying for new credit won’t have a big impact on your score.

If you start applying for every credit card offer you receive, it may have a negative impact on your credit. Another factor that’s considered in determining your credit score is the age of your accounts. Opening too many new accounts lowers the average age of your credit history.

Other Factors That Can Affect Your Credit Score

One of the things that can have the biggest impact on your credit is your payment history. It’s extremely important that you always pay your bills on time, no matter what kind of credit you have. The total amount of debt that you have and the percent of available credit you are using are other important factors considered when calculating your credit score.

Protecting Your Credit

To protect your credit, only apply for new credit and open new accounts when needed. Before applying for new credit, it’s a good idea to find out what’s on your credit report. As a consumer, you can get a free copy of your credit reports annually from AnnualCreditReport.com. Review the information being reported to make sure it’s accurate. A surprising number of people find errors in their credit reports.

Wrong payment history and wrong balances are a couple of examples of inaccurate information that may drive your credit score down. Dovly is an AI credit engine that can help you dispute errors you find on your credit report. Try it risk-free with our free membership tier.