Applying For Credit Cards Hurt Credit

Applying for credit cards can be a bit of a double-edged sword. On one hand, they offer numerous benefits, such as rewards points and building a strong credit history. However, applying for multiple cards can sometimes have an adverse effect on your credit score. In this Flik Eco article, we'll dive into the details of how applying for credit cards can hurt your credit, ways to minimize potential damage, and what you can do to maintain a healthy credit score even when seeking new lines of credit.

Why Applying for Credit Cards Can Harm Your Credit Score

When you apply for a credit card, the lender will perform a hard inquiry (also referred to as a "hard pull") on your credit report. Hard inquiries have a short-term, negative effect on your credit score, typically causing a drop of a few points. This occurs because multiple inquiries in a short period signify that you're seeking new credit, which can be a red flag to potential lenders.

Factors Influencing the Impact of Hard Inquiries

The impact of hard inquiries on your credit score depends on several factors, such as:

• Total number of inquiries: The more inquiries you have on your credit report in a short period, the more it'll impact your credit score.
• Length of your credit history: If you have a short credit history, each inquiry can impact your credit score more, as you have a limited amount of credit information available.
• Timing: It's better to space out your credit card applications over time, as multiple hard inquiries within a short timeframe may harm your credit score more.

How Long Does the Impact of Hard Inquiries Last?

Fortunately, the impact of hard inquiries on your credit score is relatively short-lived. They will only remain on your credit report for 24 months and will stop affecting your credit score after around 12 months. During this time, it’s essential to practice good credit habits, such as paying your bills on time and keeping your credit utilization low, to help your credit score rebound.

Applying For Credit Cards Hurt Credit Example:

Jane has a good credit score and wants to apply for two new credit cards to take advantage of the benefits they offer. She applies for both cards within the same week, resulting in two hard inquiries on her credit report. Her credit score takes a temporary hit, dropping by 10 points. However, by being diligent in her credit usage and payment habits, she manages to recover those lost points within a year, as the impact of the inquiries diminishes.

Understanding the potential impact of applying for credit cards on your credit score is an essential step to making smart financial decisions. While applying for multiple cards can temporarily affect your credit score, proper credit management and spacing out your applications can help mitigate any long-term damage. By following the informative content provided by Flik Eco, you'll be better equipped to manage your personal finances and make the most of your credit card benefits. If you found this article helpful, don't forget to share it with your friends and explore other personal finance guides on our website to continue expanding your financial knowledge.