Picture this: you've been meticulously researching and comparing credit cards, and you've finally narrowed down a handful of options that could be perfect for your financial goals. But wait, before you go on an application spree, you worry that applying for multiple credit cards might hurt your credit. Is it true? How much of an impact could it have on your credit score? In this post, we'll dive deep into the world of credit inquiries and explain how applying for multiple credit cards can impact your credit.
Does Applying For Multiple Credit Cards Hurt Your Credit Table of Contents
Understanding Credit Inquiries
When you apply for a credit card, the issuer conducts a hard inquiry on your credit report. A hard inquiry, also known as a hard pull, is a thorough review of your credit profile undertaken by a financial institution when you're seeking credit. This is different from a soft inquiry, which occurs when you check your own credit report or when a lender pre-approves you for an offer without your explicit consent.
How Do Credit Inquiries Affect Your Credit Score?
Credit inquiries, specifically hard inquiries, can impact your credit score in two primary ways:
- Reduction in Credit Score: A hard inquiry can reduce your credit score by a few points. Although this isn't a significant drop for most people, multiple hard inquiries in a short period can add up and potentially lead to a more substantial decline in your score.
- Appearance of Credit Neediness: Although each inquiry may have a small impact, multiple hard inquiries within a short period can give the appearance of being credit needy. This could lead potential lenders to view you as high risk, making it more challenging to obtain future credit.
The Impact of Applying for Multiple Credit Cards
While applying for multiple credit cards within a short time frame can have a few negative effects on your credit, it's essential to understand the overall picture. Let's break down the different aspects:
Short-Term Impact
In the short-term, applying for multiple credit cards can lead to a decline in your credit score due to the accumulation of hard inquiries and the appearance of credit neediness. This drop in score is more noticeable if you have a limited credit history or a lower credit score.
Long-Term Impact
Over time, the impact of multiple credit inquiries on your credit score will decrease. Hard inquiries remain on your credit report for two years; however, they only impact your credit score for the first 12 months. As you continue to make timely payments and manage your credit responsibly, your credit score should recover and potentially improve.
Strategic Approaches
Applying for multiple credit cards doesn't always equate to damaging your credit; it depends on the approach you take. Spacing out your applications over time, only applying for cards that match your credit profile, and being strategic about the types of cards you apply for can minimize the impact on your credit score.
Does Applying For Multiple Credit Cards Hurt Your Credit Example:
Suppose Sarah has a credit score of 720 and wants to apply for three different credit cards that she believes will provide the best rewards and benefits for her spending habits. Instead of applying for all three cards in one day, Sarah chooses to space out her applications over several months. She also verifies that these cards are suited for her credit profile and spending habits. Sarah might experience a small decline in her credit score after each application. Still, by following this strategic approach, she minimizes the impact on her credit score and increases the likelihood of being approved for each card. Over time, as her credit inquiries age and she manages her credit responsibly, her credit score may even improve.
Now that you know applying for multiple credit cards can temporarily impact your credit score, you can make more informed decisions when exploring your credit card options. It's always best to consider your financial goals and credit profile when deciding on the right credit product. Remember, at Flik Eco, we're here to help guide you through your personal finance journey with our informative content and expert advice. If you enjoyed this article and found it helpful, don't forget to share it with your friends and check out our other guides for more valuable tips and insights.
