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Why Applying for Lots of Credit Cards Can Hurt Your Credit

Christine DiGangi

You can have as many credit cards as you want, provided your applications are approved. Some people have 10. Others have none. Two or three works for a lot of people, too, and in the end, the amount of plastic in your wallet doesn’t really matter, as long as your credit card usage helps you move toward your financial goals.

But if you’re looking at a strategy that involves using several credit cards, it’s not a great idea to apply for them all at once.

Card Applications & Your Credit Score

Whenever you apply for new credit, whether it’s a credit card or personal loan, you’re giving your potential lender permission to check your credit, which usually results in a hard inquiry on your credit report.

Hard inquiries have a negative impact on your credit score, but it’s not a huge hit. It’s negative because shopping for credit indicates to a lender that you may potentially take on more debt, which can make you more of a lending risk. (Soft inquiries indicate times when someone pulls your credit for a reason other than making a lending decision, and they do not affect your credit score.)

A hard inquiry every once in a while isn’t going to do much to your scores, though it will stay on your credit report for two years. In fact, it can be worth the small drop in your credit score if you’re applying for a new credit card that will allow you to increase your overall available credit and help your credit utilization rate, as a result. (Credit utilization is calculated by adding up your revolving credit balances and dividing that number by your total available revolving credit. Keeping your utilization rate as low as possible really helps your credit score.)

Shopping Around

With some forms of credit, like mortgages, multiple inquiries in a short period of time will only be counted by the bureaus as one hard inquiry on your credit report. The time frame depends on the scoring model (keeping your shopping period to two weeks is a good rule of thumb), but the point of this is to allow borrowers to find the best available deal without trashing their credit scores in the process.

Take note: This shopping process does not apply to credit card applications. If you apply for several cards in a short period of time, either because you’ve been rejected a few times or because you want a lot of credit cards in your wallet, the slew of inquiries could add up to a significant drop in credit scores.

Unnecessarily adding hard inquiries to your credit report could damage your score and prevent you from getting a loan you really need later on.

If you’re interested in seeing how many inquiries are on your credit reports and how they’re impacting your credit scores, the free Credit Report Card will show you two of your scores and the major factors impacting them. You may also want to pull your free annual credit reports, which will outline who has pulled your reports.

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