How Your New Credit Card Could Hurt Your Credit

Chances are, you recently received a new EMV chip credit card or debit card. (And, if you haven’t, don’t fret: yours is likely in the mail.) These cards can certainly help protect you from counterfeiting, but cardholders beware: There is a way they could inadvertently hurt your credit score.

Replacement cards — typically issued when a card expires, fraud occurs or an issuer needs to do an upgrade — more often than not come with some type of change to your account information.

“The changes could be subtle or they could be obvious,” Bruce McClary, vice president of public relations and external affairs at the National Foundation for Credit Counseling, said. For instance, the account number on the front of your card may stay the same, while the expiration date or its security code (located on the back) could be different.

Changes to any piece of this aforementioned data, however, could cause an automatic bill or recurring payment associated with the card to get declined. “When [creditors or service providers] try to process your next charge, it’s going to come back rejected,” McClary said. After that, “there are whole number of scenarios that could unfold.”

In a best-case scenario, the creditor or service provider would call you, get the new account information and process the payment before it’s actually due. In a less-than-ideal scenario, the bill could go unpaid — and if this bill is a loan payment (more commonly tied to debit cards or checking accounts, though some creditors do accept payment via credit card), you may wind up with a missed payment on your credit report. Missed payments are one of the quickest ways to tank a good credit score. In fact, a new one can cause a drop of about 100 points to a FICO score of 780 or higher.

Missing a non-loan payment, like a gym membership or streaming subscription, can be equally problematic, since, if left unaddressed long enough, they could wind up in collections — and that type of slip will also badly damage a previously stellar credit score.

How to Prevent Any Credit Score Problems

Once you get an EMV chip card — or any replacement credit or debit card, really — in the mail, spend some time reviewing the monthly billing statements associated with that account to identify any linked automatic billing or recurring charges. “Go back 12 months if you can, because sometimes you have things that you are billed for annually,” McClary said. You can call these creditors or service providers to update your billing information. (You may be able to do this online as well.)

You can also monitor your credit report regularly to spot a missed payment or collections obligation. You can get your credit report for free each year at AnnualCreditReport.com or check your credit scores each month for free on Credit.com.

There are some steps, too, that you can take to minimize the odds of a replacement card coming back to haunt your credit score. First, “designate one of your credit cards as the card that any of your accounts that you want to have automatically processed,” McClary said. “The simpler, the better when it comes to automatic billing.”

You can also try signing up for any email or text messaging alerts that a creditor or, even, service provider, like your cable company, may offer. These alerts can help you keep track of due dates and readily spot if a payment has gone unprocessed.