Impact of New Credit Card on Credit Score

A credit score determines the trustworthiness of an individual in the credit market. The system checks the financial status to determine the credit-worthiness. This has become such a secure method that everyone checks the credit scores.

Money and other credits are available only after such checks are completed, house owners are checking them to ensure timely payment of rent, and employers are also checking them to ensure the reliability of an employee. So a thorough knowledge is necessary to understand and monitor our credit scores so that we do not lose score due to ignorance.

Here is a guideline to help you understand and analyse your credit score and take proper measures to improve them.

1. Scoring Elements - There are five elements that determine the Credit score:
1. Bill Payment - This makes up the chunk of the report almost about 35% of the entire score and is best kept updated.
2. Credit History - The average length of the credit history conveys some message to the new creditors and hence makes up the next major portion of the score - It makes about 15% of the score.
3. Types of Credits: The types of credit previously applied also gives a hint of the condition of the credit taker and hence makes 10% of the score.
4. New Credits - Rest 10% makes up the fresh credits that have been applied even before the previous ones have been paid.
2. Implications of a New Credit card - When a new credit card appears in the credit history it affects the credit score. It is said that the longer the history higher goes the score. Averages of all the accounts are calculated to determine the score. Hence, a new credit card means an added member on the average and it automatically shortens the length resulting in a lowering of the score.
3. A Word of Caution - Some credit card companies send individuals pre-approved cards. These cards do not affect our scores unless they are accepted by the debtor. So before walking in to accept such cards try to ensure that you really need and can handle this new addition.
4. Frequent Enquiries - Enquiries conducted to your credit score can also lower your score and applying for new credit cards actually leads the issuer to conduct an enquiry and hence can leave an effect.
5.  Final Warning - Applying for new credit cards frequently can seriously damage the score count as it is considered as a desperate condition and the debtor must be too much in debt to ask for so much credit.   

Utmost caution should be observed and proper advice should be taken from experts before applying for a credit card as that may directly and sometimes negatively affect your credit score.