You may be interested in applying for several credit cards. You might want the best traveling credit card or the best shopping credit card. Students might look for the best cash back credit card or no annual fee card. However, we all wonder can apply for more than one credit card in a short duration affect your credit score. Well, it can, but it necessarily may not, it all depends on various factors. Let us look at how your credit score may be affected if you apply for multiple cards together.
First, let us understand what a credit score is:
A credit score is an indication according to which lenders and other parties decide whether they should give you credit. A credit score of the applicant is taken out when he applies for a credit card, finance, or a loan. A credit score is determined on the following factors: Credit utilization, Payment history, Length of credit history, Credit mix, Credit inquiries
Credit Inquiries
Whenever you apply for a credit card, a credit score inquiry is made, but since Credit inquiries constitute just 10% of the credit score, the impact is mostly minimal. But if you will apply for multiple credit cards at the same time, there is a hard inquiry. Lenders also get worried about your default risk and so your application may be rejected. A score may be impacted because of various reasons like the time when the last inquiry was made or when did you open your last account. Hard inquiries impact your credit score for a year but remain on your report for two years. Each inquiry impacts your score. However, the impact is more if you have a short credit history with few accounts. People who have a long credit history and more accounts will see less impact.
Why people suddenly apply for multiple credit cards:
Many people apply for multiple credit cards at one to enjoy sign up bonuses, cash rewards, etc. This may force people to open many accounts at once.
How does applying for multiple cards affect your score:
If you apply for too many credit cards at once, there is a high chance that all your card issuers are going to make a hard inquiry of your credit score and if you will have a short credit history your score who be adversely affected with each inquiry.
Still, want to apply for multiple cards? Avoid these mistakes:
Don’t rush into opening new accounts; take a gap of at least 90 days, before applying for a new credit card. Even if you are trying to get in signup bonuses or other rewards, wait patiently for three months for things to settle down. Otherwise, your overall credit score may be adversely impacted.
Already own multiple credit cards? Then pay off all the balances, don’t keep any reloving balance so that you can keep the credit utilization ratio low.
It is wise to have multiple credit card accounts if you can manage then well, as your credit utilization will decrease.
Plan before you apply for a credit card. Don’t just blindly open a new account just in the greed of getting the signup bonus. Take in cards for different purposes, e.g. if you already have a traveling credit card, then do not apply for another one unless you are getting more benefits. Keep one credit card for shopping, another for traveling and another one for an emergency. Keep your needs in mind and then apply for the cards according to your requirements.
Always make payments on time; delaying payments can negatively impact your credit score.
Having multiple cards is not wrong, but misusing them can cause you a lot of trouble. Pointofcards, can help you maximize your card spending potential. Look out for more interesting details.