More isn't always merrier where credit cards are concerned. After you have your first credit card, you may be anxious to get others, but every time you apply for new credit card, you ding your credit score a few points, and when you apply for several cards in a short time span, your standing erodes to creditors. There is no formula for timing your next new credit application to keep your credit robust because each person's credit situation is different, but it is probably best to develop a pattern of paying your first card regularly before applying for a new card. Even then, apply for only one card, not several.
The lure of so many credit card offers in the mail may be too enticing to resist, but resist you must if you want to keep your credit score in check. Because every new credit card application triggers what is called a "hard pull" to your credit report, as opposed to a "soft pull," which has no effect on your score, you risk sinking your credit score with a succession of inquiries. Creditors interpret a series of hard pulls on a report as a sign that you are desperate for credit. More than six inquiries on a credit report increase the likelihood of bankruptcy eightfold, according to credit-scoring firm Fair Isaac Corporation, so credit card companies are understandably cautious.
If you have already opened a new credit card account and anticipate opening another one, first make sure that the new card is necessary. If it is or if you need a certain amount of additional credit, choose the fewest number of cards that give you the credit line you need to minimize the impact on your credit score. If you are determined to sign up for a handful of outstanding offers, be prepared to see a small drop in your credit score each time you apply.
While the impact of multiple card signups may be harmful to your credit initially, in the long run, the greater credit allowance afforded by the new cards could work out in your favor. However, for this benefit to kick in, you'll have to make payments on time and keep balances low relative to the amount of credit available. Over the course of several months, the combination of higher credit availability and timely payments could bring your score up. At that point, applying for a new card -- if you really need it -- could make sense.
Some travelers in search of the best travel rewards credit card offers, do what is called churning, in which they sign up for a bunch of high-perks offers at once, accrue the program bonuses, cancel the card and then start all over again. They do this without ruining their credit, says travel points resource Well-Traveled Mile, because they make payments on time and also sign up for multiple cards on the same day, which credit bureaus sometimes record as one inquiry, instead of several.
- My FICO: Is There a Best Way to Go about Applying for New Credit to Minimize the Effect to My FICO Score?
- US News Money: 5 Ways to Maximize Credit-Card Perks Without Ruining Your Credit Score
- Money Talks News: Ask an Expert: Will Opening a New Credit Card Hurt My Credit Score?
- My FICO: Will My FICO Score Drop if I Apply for New Credit?
- Well-Traveled Mile: How to Prepare for Multiple Credit Card Applications
- Credit Card Chaser: Can I Apply for More Than One Credit Card at a Time?
Timothea Xi has been writing business and finance articles since 2013. She has worked as an alternative investment adviser in Miami, specializing in managed futures. Xi has also worked as a stockbroker in New York City.