Q&A: Applying for multiple credit cards at the same time is a bad idea

Do some research: Seek the one card that best suits your needs and with the best odds of approval

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question

Dear Credit Guy
Is it OK to apply for multiple credit cards at the same time? – Darryl

Answer

Dear Darryl,
It is generally not a good practice to apply for multiple credit cards at the same time, if you care about your credit score. There are several reasons not to seek several cards at once, and most have to do with the effect applying for credit has on your credit score.

When you apply for credit of any kind – whether it is for a credit card, a car loan or a mortgage, etc. – your credit report is flagged with what is known as a “hard inquiry.”

While a hard inquiry will nearly always trigger at least a temporary decrease in your credit score by five or fewer points, if you are granted the credit you applied for, your score will get a boost as you will have additional available credit. Sometimes those two things will work to balance each other out and your score will remain much the same.

However, if you are turned down for the credit you apply for, you will still have a hard inquiry on your score, adding a slight drag to your credit. Hard inquiries stay on your reports for two years, and become less important after that first year.

Multiple inquiries and credit score
The hard inquiry penalty is how the credit scoring models frown on multiple credit card applicatoins. Credit scores exist chiefly to give lenders an idea of how you handle your finances and what kind of risk they are taking by extending you credit. Multiple applications can equate to higher risk, especially when it comes to credit card inquiries.

 

Video: What to do before applying for a new credit card

Each credit card application will result in a hard inquiry. With mortgages, auto loans and student loans, it’s different: Multiple credit inquiries are grouped if taken out within a short period, and count against you only once. This bundling of multiple inquiries allows for some shopping around for better rates and terms for home, car and student loans.

Why the difference? It’s because people typically only get one house, one car and one student loan at a time, so it makes sense to group the inquiries.

With credit cards, though, there’s the real chance that the applicant really wants multiple cards. That brings us to another reason to avoid rapid-fire credit card applications: They might say “yes.”

In addition to the additional hassle of managing a bunch of extra cards, you also likely would face multiple minimum spending requirements. About 3 in 4 cards on the market today are rewards cards, and many have sign-up bonuses that require you to spend a certain amount in a short period. With multiple cards with minimum spending requirements, that’s a lot of spending, which you may not want or need.

While you may not feel your credit score is that important to you right now, chances are it will be in the future. Actions you take now will stay on your credit report for many years and could affect your ability to qualify for the best rates on a mortgage or car loan. 

You should also know that insurance companies, employers and landlords also can access your credit report, and risky credit behavior could hurt you.

A wiser way to apply for a credit card
A better idea for you is to research the credit cards you are considering and pick the one that best suits your needs, and for which the odds are greatest for approval.

  • If you are turned down, wait a few months before you apply for another card. In the meantime, here are three steps you can take to better your chances of being approved next time.
  • If you still can’t qualify for a credit card, you may need to look for a secured card, or you may need to consider other options.

Once you have a credit card, practice good credit behavior. This means staying well below your credit limit and paying your bill on time, every time.

This is the best way to build your credit score so that when the time comes to apply for substantial credit, your lender will see you as a good risk – as will others who may access your credit report.

Take care of your credit!

See related: 18 things that hurt your credit score, How credit score formula handles multiple credit inquiries 

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Updated: 11-22-2017