Your FICO credit score ranges from 300 to 850 and can affect several areas of your life. Lenders and credit issuers check your credit before approving you for a loan or other credit products. Landlords look over your credit prior to accepting you as a tenant. In certain cases, employers view your credit before extending you a job offer. It's important to understand how activating a new credit card will impact your credit score.
Identification
Your FICO score is based upon the data within your credit report and contains five separate elements, according to MyFICO. Thirty percent of your score is the amount of debt you have, 35 percent reflects how you pay your bills, 10 percent measures the types of credit you have, 15 percent is the average length of your credit history and the final 10 percent reflects the amount of new credit you've recently applied for.
Significance
Activating a new credit card after you're approved does not impact your FICO credit score. What does affect your score is if you apply for a new credit card and are approved, that card issuer will report the card to the credit bureau. After a new credit card appears on your credit report, it impacts the length of your credit history. FICO takes the average of all your accounts and the longer your history, the better it is for your score. A new account shortens the average length of your history and may cause your score to drop. How much it drops depends upon the other items found in the report.
Consideration
Some credit card issuers send out pre-approved credit card offers that you did not apply for. Under the Fair Credit Reporting Act, lenders can access your credit without your express permission for the sole purpose of extending you firm offers of credit. These card offers do not affect your credit score unless you call in to accept the credit offer. If you do, the credit account will appear on your report and thus impact your score.
Warning
FICO considers how much new credit you have acquired recently when computing your score; this makes up to 10 percent. If you apply for several new accounts around the same time, FICO considers this risky behavior and it may lower your score. Also, each new account that appears on your credit report shortens your average credit length, which can further negatively impact your score, especially if you're a new credit user, according to MyFICO. Only apply for new credit when it's necessary.
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