Home » [Credit Score] Can Applying for Multiple Credit Cards Affect Your Credit Score

[Credit Score] Can Applying for Multiple Credit Cards Affect Your Credit Score

[Credit Score] Can Applying for Multiple Credit Cards Affect Your Credit Score

Often times one might be in a fix of adding an extra credit card to his/her credit card wallet.

You know there is no hard and fast rule to this as it always thought that having multiple credit cards would result in reduced credit score.

Any reduction in your credit card score happens based on your situation par time.

Your Credit Score

Your credit score determines if your credit card application will be approved by the card provider. It can also be used by certain House Owners or Mortgage Companies.

Now let’s take a look at the Five Major Components of your Credit score:

  • Your Payment history
  • Credit utilization
  • The Length of the credit history
  • New credit/Credit inquiries
  • Credit mix

Applying for multiple credit cards primarily affects two of them

Credit Inquiry and Credit Utilization.

Your Credit utilization composes of only about 30% of your credit score while the credit inquiries constitute only 10% of your credit score.

Credit Inquiries

Applying for multiple credit cards affects the credit inquiry aspect of your credit score but because it makes up just 10% of your credit score the impact on your credit score is quite minimal.

Whenever you apply for a new credit card, The credit card provider places a hard inquiry on your credit report to determine if you are fit to be approved of that particular card at that point in time. This hard inquiry made on your credit report can or may not affect your credit score.

The number of hard inquiries placed how your credit report can make the credit card provider worried about your risk to default payments and this might lead to the disapproval of your credit card application.

How Can Hard Inquiry Affect Credit Score?

The number of inquiries made on your account since you opened the account is a major factor.  The time of your last inquiry and the strength of your credit history can make hard inquiries affect  your credit score when applying for multiple credit cards

  • Hard inquiries remain on your credit report for two years but will only impact your credit score for one year. So you see the point
  • Each hard inquiry done impacts your credit score by a few points. So if you have just a few accounts with a short credit history, then the impact on your credit score will be more than if you have more accounts with a longer credit history.

[Credit Score] Can Applying for Multiple Credit Cards Affect Your Credit Score

[Credit Score] Can Applying for Multiple Credit Cards Affect Your Credit Score

Credit Utilization

Credit utilization is 30% of your credit score and is impacted by applying for multiple credit cards.

Most Credit Card Experts say that keeping your credit utilization under 30% is a good way to keep a good credit score. If your total credit utilization on all your debt, including all credit cards and loans is 30% or less, that also bodes well for your credit score. If you open two new credit card accounts, it will end up raising your credit limit and improve your credit utilization but affect your credit score because of two hard inquiries.

Your credit utilization ratio is another factor in your credit score. This refers to how much debt you owe on your credit card when compared to your credit limit. For instance, if you have a credit limit of $1,000 and you owe $250 on the card, you can find your credit utilization:

Credit Utilization = $250/$1000 = 0 .25 or 25%

Even though your credit utilization ratio will improve if you open multiple credit card accounts, you may find that lenders are concerned with your ability to make the payments on several cards.

According to FICO, the best credit utilization is 7% for all debt, though less than 30% is okay. People with the highest credit scores usually have credit utilization ratios of 7% or lower.

Points to Note When Applying for Multiple Credit Cards

Do not Open more than one new account every 90 days even if you are trying to get signup bonuses or other rewards. This will reduce your credit score drastically.

In the case you have multiple credit cards, ensure you pay off your balances in full every month to keep your credit utilization ratio as low as possible.

Having multiple credit card accounts can decrease your credit utilization. If you can manage them well then no problem.

Always plan strategically before applying for extra credit cards. Remember Different cards have different purposes. So if you already have a good travel card, for example, you might want to open another credit card account, with a lower interest rate or a zero percent promotional rate that allows balance transfers. Opening more than one account also allows you to have an additional credit card in case of emergency.

In conclusion, applying for multiple credit cards can really affect your credit score unless you are very strategic in management. If you are, then you can take advantage of it for emergencies and enjoy rewards money in the form of signup bonuses, cash back, and loyalty rewards.