Does Upgrading Your Credit Card Hurt Your Credit Score?

NicolasMcComber/ Getty Pictures

There are many causes to improve your bank card, and never all of them must do with getting extra perks. For instance, if you happen to’ve had the identical bank card since faculty, however you’ve graduated now and now not need a pupil bank card, that’s a cause to improve your card.

Or possibly you solely had truthful credit score while you utilized in your present bank card, however you’ve since improved your rating sufficient to unlock premium bank cards with high perks. That’s another excuse to take a look at different high bank card provides that can reward your good credit score with beneficiant bonus provides, elevated reward-earning charges and advantages like airport lounge entry and annual journey credit.

Upgrading your card shouldn’t have an effect on your credit score rating

Upgrading your card sometimes requires a “product change,” by means of which the cardboard issuer strikes your current credit score line to a unique card product. This not often ever leads to a tough inquiry in your credit score studies, nor does it influence your credit score utilization ratio because it doesn’t add or subtract any debt. In consequence, upgrading your bank card to a greater card sometimes is not going to have any impact in your credit score rating.

Additionally be aware that the identical rule additionally applies if you happen to downgrade your bank card, or request a change to a different card from the identical issuer for any cause. As an example, when you’ve got a bank card with an annual charge, and also you’re bored with paying it, you might be able to change to a no annual charge card from the identical issuer with no influence in your credit score rating.

You’ll miss out on a bank card sign-up bonus

The most important situation with upgrading your bank card versus signing up for a brand new card is that you just’ll miss out on incomes a bank card sign-up bonus. To earn a bank card sign-up bonus, you will need to apply for a brand new account and meet the minimal spending necessities as a brand new card buyer. That is true for any bank card product change you request, whether or not it’s an improve or a downgrade.

As an example, if you happen to’ve had the Chase Sapphire Most popular® Card for 5 years and also you determine to ask Chase if you happen to can improve to the Chase Sapphire Reserve® to get airport lounge entry, you gained’t be eligible for the brand new cardmember bonus.

Alternatively, if you happen to utilized for the Chase Sapphire Reserve individually and met all the necessities to be authorized and earn the bonus: Earn 60,000 bonus factors after you spend $5,000 on purchases within the first 3 months from account opening..

Hold software restrictions in thoughts

For instance, most individuals know that Chase’s 5/24 rule means you gained’t be authorized for one of many issuer’s playing cards if you happen to’ve opened 5 or extra new bank cards from any issuer within the final 24 months.

Chase additionally has “card household” guidelines. One such rule is that you may solely be the first account holder on one Sapphire card at a time — both the Most popular or the Reserve. It implies that in our earlier instance, if you wish to get the Chase Sapphire Reserve as a Most popular cardholder, you’d want to shut your Most popular account earlier than you’d be eligible to earn the bonus on the Chase Sapphire Reserve.

Nevertheless, the applying for the Chase Sapphire Reserve additionally states that the welcome bonus on this card just isn’t obtainable to “present cardmembers of any Sapphire bank card or earlier cardmembers of any Sapphire bank card who obtained a brand new cardmember bonus inside the final 48 months.” Should you held the Most popular card for lower than 4 years, you continue to is probably not eligible for the Reserve’s welcome bonus — even if you happen to shut the account earlier than making use of.

American Categorical, for its half, has a “as soon as per lifetime” rule that claims you may solely earn the welcome bonus on its playing cards as soon as per lifetime. (Although some sources say this rule resets each seven to eight years, that quantity has not been formally confirmed). With Amex playing cards, upgrading to a card you’ve by no means had additionally means you’d be ineligible to earn the welcome bonus on that card sooner or later.

For example, contemplate that the advantageous print on the Platinum Card® from American Categorical reads: “You is probably not eligible to obtain a welcome provide when you’ve got or have had this Card, the Platinum Card from American Categorical Solely for Charles Schwab, the Platinum Card from American Categorical Solely for Morgan Stanley or earlier variations of those Playing cards.”

When to use for a brand new card as a substitute

So long as you observe software restrictions, you’re virtually at all times higher off making use of for a brand new bank card as a substitute of upgrading an current line of credit score with a product change to a brand new card.

The rationale for that is twofold:

• You get the prospect to earn a beneficiant welcome bonus so long as you qualify.
• Making use of for a brand new bank card can result in having extra open credit score obtainable to you.

The latter can decrease your credit score utilization ratio, which is a vital issue that makes up roughly 30% of your FICO Rating.

There are a couple of short-lived downsides that may come into play if you happen to apply for a brand new card:

• A tough inquiry in your credit score report can have a slight destructive influence in your credit score rating for a couple of months.
• The size of your credit score historical past shortens with every new account and this issue makes up 15% of FICO Rating.

The underside line

You may improve your bank card if you happen to’d like, however there might also be compelling causes to use for a brand new card as a substitute. The selection is yours — by realizing the professionals and cons of every strategy, you’ll be higher ready to make an knowledgeable choice to search out the perfect bank card in your spending habits.