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Can Opening a New Account Hurt My Credit Score?

Dear Experian,

Why did my credit score go down 35 points for opening a CareCredit account?

- OMO

Dear OMO,

Like any change to your credit history, opening a new account can cause your credit scores to fluctuate. When you first apply for the account, an inquiry will appear on your credit report. Because that inquiry represents a potential new debt, you may see a slight dip in your credit scores. Once the account is reported, you probably will see a change as well. There are couple of reasons for this.

Making Payments on Time Will Help Your Credit Scores

One reason scores may drop is that you've taken on a new debt, and it's not immediately clear how you will manage that debt. Your payment history is the most important factor in credit scores. As you continue making on-time payments on your new account, you will demonstrate that you are able to manage the new debt responsibly. Your positive payment history will be reflected in your credit report, and you should see your credit scores begin to rebound.

How Your Credit Card Balance Affects Your Credit Score

Another reason opening your new account may have caused your credit scores to decrease has to do with the balance on your account and how it affects your utilization rate, sometimes referred to as your utilization ratio.

A CareCredit account is a revolving account used to finance healthcare costs. Like all revolving
accounts, you are approved for a certain credit limit, and you decide how much you will charge to the account and how much you will repay each month.

The utilization rate on your new account is calculated by taking the balance of the account and dividing it by the credit limit. For example, if you were given a $2,000 spending limit and you charged $1,000 worth of dental work, your utilization rate on that account would be 50 percent. A utilization rate of more than 30 percent can have a greater negative impact on your credit scores.

Utilization Rate is Very Important

Having a high balance on one account can also affect your overall utilization rate, which is the total of all your credit card balances divided by the total of all your credit card limits. Credit utilization rate is the second most important factor in credit scores, so your overall utilization rate can have a substantial effect on your scores. As you continue make payments on the account and your balance starts to decrease, your utilization rate will begin to decrease as well. Experts say an overall utilization rate of less than 10 percent is best, so paying down any other outstanding balances can also help.

Improving Your Credit Scores

There are two main things anyone can do to improve their credit scores: make all your payments on time, and keep your credit card balances low.

When you order a credit score from Experian, you will receive a list of the top risk factors that are most impacting your scores at that moment. They are specific to you and your unique credit history. By focusing on improving those factors as well, you can make changes that will help improve your credit scores.

Thanks for asking,
Jennifer White, Consumer Education Specialist


Want to instantly increase your credit score? Experian Boost helps by giving you credit for the utility and mobile phone bills you're already paying. Until now, those payments did not positively impact your score.

This service is completely free and can boost your credit scores fast by using your own positive payment history. It can also help those with poor or limited credit situations. Other services such as credit repair may cost you up to thousands and only help remove inaccuracies from your credit report.

How Good Is Your Credit Score?

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