Picture this: you've decided to start your journey in building credit and want to apply for a credit card (or two) to help you out. But you might be wondering, "How many credit cards should I apply for at once?" Well, Flik Eco is here to provide you with an engaging, high-energy, and practical guide on managing credit card applications, the impact on your credit score, and much more.
How Many Credit Cards To Apply For At Once Table of Contents
The Basics – Applying for Credit Cards
Before we delve deeper into the number of credit cards you should apply for simultaneously, let's discuss the factors that come into play:
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Hard Inquiries
A hard inquiry takes place when a potential lender checks your credit as part of their decision-making process. Typically, a single hard inquiry on your credit report can lower your score by a few points temporarily, and it remains visible for two years. However, multiple credit card inquiries within a short period can raise red flags for lenders and impact your overall score negatively.
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Credit Utilization Ratio
One of the essential aspects of credit scores is your credit utilization ratio, which is the balance you owe on your credit cards divided by your credit limit. For instance, if you use $1,000 of a $5,000 limit, your utilization ratio is 20%. A lower ratio indicates responsible spending habits and can improve your credit score. However, opening several new credit cards may push your overall utilization ratio higher and adversely affect your credit rating.
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Average Age of Accounts
Another factor in your credit score is the average age of your accounts. Generally, a longer account history can result in a higher credit score. Applying for multiple credit cards at once reduces the average age of your accounts, which might lower your score.
Recommended Strategy: Apply for One Credit Card at a Time
Flik Eco suggests applying for one credit card at a time for several reasons:
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Minimize the Impact on Your Credit Score
Applying for one card at a time minimizes the effect of hard inquiries, keeps your credit utilization ratio lower, and allows for a longer average age of accounts.
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Manage Your Spending and Payments Better
Paying your bills on time and using a small percentage of your total credit limit can help build a strong credit score. Focusing on just one card allows you to manage your spending and track your payments more effectively.
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Avoiding the "Credit Card Churning" Practice
Credit card churning is when someone opens new credit card accounts to earn rewards, then closes those accounts after redeeming the perks. This practice damages the overall credit score and could lead to card issuers barring you from opening new accounts.
How Many Credit Cards To Apply For At Once Example:
Imagine that John wants to build his credit to apply for a mortgage. He applies for three credit cards at once to maximize rewards and make a significant purchase. However, John's credit score may suffer due to the hard inquiries, reduced account age, and an increased utilization ratio. John would have been better off applying for one card and consistently paying his bills on time.
Now that you've learned why applying for one credit card at a time is the best strategy, you can confidently embark on your journey to excellent credit status. If you found our guide helpful, don't forget to share it with your fellow millennial friends and explore more personal finance tips at Flik Eco.
