 TITLE: How Do Credit Cards Affect Your Credit Score? CONTENT: How Opening a Credit Card Can Impact Your Credit Score\n------------------------------------------------------\nCredit scoring models take a close look at credit card activity when determining your credit score. Because you have more discretion with how you manage credit cards than you do with other types of credit, such as a student loan or mortgage, how you handle credit card accounts helps scoring models measure what type of risk you pose to lenders.\nCredit cards can impact your credit score from the moment you apply for a card. Here are a few ways opening a credit card can affect your credit score.\n### 1\\. It adds hard inquiries to your credit file.\nLenders will inquire about your credit to determine what risk you pose as a borrower. There are two types of inquiries into your credit files, and each affects your credit differently.\nSoft inquiries don't have an impact on your credit score. Examples of soft inquiries include when you check your credit and when you are prequalified for special offers from credit issuers.\nHard inquiries are different. Lenders perform hard inquiries when they are considering whether or not to lend you money, and this can negatively affect your credit score in the short term. Applying for a new credit card will result in a hard inquiry in your credit file, which could lower your score by a few points. While a hard inquiry will remain on your report for two years, it will only affect your credit score for a few months.\n### 2\\. It may increase your credit mix.\nEven if you don't yet have a credit card, you may have other forms of credit, such as a personal loan or auto loan. These are installment loans: You borrow a set amount, pay it off in monthly installments, and once paid, the account is closed.\nCredit cards, on the other hand, are considered revolving credit. Revolving credit allows you to borrow over and over up to a set limit as long as you make at least a minimum payment (determined by the card issuer) every month. Any unpaid balance rolls over, or revolves, monthly. Interest will be charged on whatever balance remains unpaid.\nIf you only hold installment credit, getting a credit card will increase the types of credit you maintain, known as your credit mix. Having both installment and revolving credit shows lenders you can manage different types of credit accounts (assuming you make all your payments as agreed). This can help your credit score, as credit mix accounts for 10% of your FICO® Score☉ , the scoring model most commonly used by lenders.\n### 3\\. It hurts your average age of accounts—but may help your credit utilization.\nGenerally, the longer you've held credit accounts, the more it will help your credit score. This is especially the case if you've kept your accounts active, always made your payments on time and never missed a payment.\nWhen you open a new credit card, you'll bring down the average age of your credit accounts. Credit scoring models look at this average age when calculating credit scores. As part of the length of your credit history, which makes up 15% of your FICO® Score, the average age of your accounts could hurt your credit score if it decreases.\nClosing a credit card account could have a much bigger effect on length of credit than opening one, however. More on that below.\nOn the positive side, opening a new credit card account adds to your total credit limit, which can help lower your credit utilization rate, or percentage of total revolving credit you're using relative to your total credit limit. Credit utilization is the second most important factor in your FICO® Score calculation behind payment history.\nExperts recommend keeping your credit utilization under 30% to help maintain a good credit score, but the lower, the better. So, for example, if your total available credit across all your credit cards is $9,000, keep your total amount owed on those accounts under $3,000. For top credit scores, utilization should be under 7%.\nOpening a new credit card instantly adds to the amount of credit available to you, which can give your credit score a bump. More important, though, is what happens once you start using your new credit card. END