Does applying for a credit card affect my credit score? How much?

It can, but it’s important to understand why and how much it can affect your score.

10% of your credit score is based on new credit accounts.  Opening new credit cards and other credit lines and loans will negatively affect your score temporarily.  When you apply for a new credit account a creditor will obtain your credit score from the credit bureaus.  This inquiry is reported to the credit bureaus, who record this application as a “Hard Inquiry” on your credit report.  Hard inquiries are those you’ve given a lender permission to obtain for the specific purpose of determining whether or not to extend a line of credit or a loan to you.  (Soft inquiries do not affect your credit score, and refer to other credit score inquiries, including looking at your own credit score.)

How much a Hard Inquiry affects your credit is dependent on numerous factors, including your credit history, but your credit score could go down by only 5 points due to a hard inquiry being recorded.

What happens if you’re shopping around and different creditors make several Hard Inquiries?  Luckily the credit bureaus recognize that multiple inquiries within a short period of time are usually a sign that someone is shopping around.  These inquiries will most likely be lumped together as far as the credit bureaus are concerned and only count as a single Hard Inquiry.

Good Credit Sense:

Do your research ahead of time.  Apply for new credit cards and other credit and loan products when you are ready.  This will minimize the number of hard inquiries on your credit score and ensure that potential creditors don’t misinterpret multiple Hard Inquiries on your credit report as desperation to obtain credit.