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Here’s What Applying for Multiple Credit Cards Does to Your Credit Score

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It isn’t always easy to be approved for a credit card, particularly if you don’t have excellent credit. You may think it makes sense to apply for several cards at the same time — after all, the more you apply for, the more likely it is you’ll be accepted by one of them.


Not so fast. Applying for multiple cards at once also means multiple hard inquiries on your credit report, which can ding your credit score more than when you apply for only one card at a time. There are other risks as well, says Matt Schulz, chief industry analyst with CompareCards, which, similar to MagnifyMoney, is owned by LendingTree.

“Applying for too many cards at one time can raise red flags with lenders and make you look desperate,” he said.

However, he added, applying for new credit is hardly all bad, provided you’re approved for the card. “The positive effect of that new card on your credit utilization will often override any negative caused by the hard inquiry,” he said.

Below we’ll explore exactly how applying for multiple credit cards may affect your credit score, for better or worse.

What happens to your credit score when you apply for several cards at once?

Your FICO score is the one most often used by lenders, and it comprises five key factors. Find out which of these will be most affected if you apply for several credit cards at once.

  1. Payment history. The most important element of your FICO score is payment history, which comprises 35% of your total score. Making regular, on-time payments on all your loans, from credit cards to mortgages, is how you maintain a healthy credit history and score. Applying for several credit cards at once doesn’t have an immediate effect on your payment history — however, if you have several credit cards and have a hard time juggling multiple payment due dates, which causes you to eventually miss one or two payments, your credit score will take a nosedive.
  2. Credit utilization. The next-most important part of your credit score, at 30%, is your credit utilization ratio, which is the percentage of your available credit that’s been borrowed. This is where applying for multiple credit cards can have a positive effect on your credit score over time. Why? Because when you add a new line of credit, your utilization ratio will decrease if you are carrying a balance on any other cards, which can boost your score. Utilization is measured by individual cards as well as across all your cards. For example, let’s say you have just one credit card with a limit of $5,000, and you charge around $2,000 a month. That would put your utilization ratio at 40%. It’s generally recommended that you keep your utilization ratio below 30% — and the lower, the better. Now let’s say you apply for two more credit cards, and your overall credit limit across all three cards is now $20,000. If you keep your credit card charges at $2,000 per month, your utilization rate will drop to a low 10%. That’s good news!
  3. Length of credit history, at 15%, is the third-most important aspect of your FICO score. The longer you’ve been using credit responsibly, the better, as you’ve had more time to prove your creditworthiness to lenders. Obtaining several new credit cards could put a dent in this part of your score, as the length of credit history is an average of all your accounts. So if you have one card that’s five years old, and two others that are brand new, your overall credit history will be shorter. However, as time goes on, if you use the new cards wisely, your score should rise.
  4. New credit makes up 10% of your overall score. Opening up multiple new lines of credit at once can be a negative in this category, given the multiple hard inquiries and the potential of seeming “desperate” to some lenders. “It’s fine to open three or four cards over the course of a year, but doing so in a single week might not be the best idea,” CompareCards’ Schulz said.
  5. Credit mix. The final 10% of your FICO score comes from your credit mix. Lenders like to see that you can handle several different kinds of credit, from installment loans (such as mortgage and auto loans) to revolving credit, such as credit cards. If you only have one kind of loan — say, an auto loan — and then apply for and obtain a couple of credit cards, this could be good for your credit score.

How credit card rejections impact your score

Now, let’s say you apply for multiple credit cards — and are rejected for all of them. Will this hurt your score even more than the hard inquiries on your account? Actually — no. While getting rejected might feel bad, and it will be harder to build up a credit history if you have trouble getting credit in the first place, the good news is that the actual rejection is a non-factor for your score, as it’s not noted in your credit report. The good news about hard inquiries is that they are temporary. They stay on your credit report for two years, but their impact fades after one year. One hard inquiry can knock your score down anywhere from 5 to 10 points, so the lower your score is now, the harder it will fall compared to someone with an excellent score who can afford a minor dip.

How many credit cards should you have?

You may wonder if there is an ideal number of credit cards to have. The answer to that is — not really. The number of cards you should have depends on your individual situation and how responsible you are in your overall budgeting and spending habits. Some people can manage 10 cards at once, while for others, two cards are enough.

“If you don’t think you can handle getting another credit card, don’t get it,” Schulz advised. “The stakes are too high.”

The main items to remember, no matter how many cards you have, are to always make on-time payments and to keep your utilization ratio as low as possible. So, if you do have fewer cards and a lower credit limit, manage your cards accordingly.

Tips to avoid the credit debt trap

So what are the best ways to manage your credit cards? Here are three tips to help you avoid the scourge of debt.

  • This one may sound simple, but it’s crucial — never charge what you can’t afford to pay off promptly. Your cards should be used for convenience and credit building, not to buy luxury items you can’t pay for in cash.
  • Along with never charging what you cannot afford, you shouldn’t make just minimum payments on your card. It will take you a much longer time to pay off your debt this way, and you’ll end up paying far more for the items you charged than what they were originally worth due to the interest that will accrue (an exception is if you are still in the promotional period for a 0% card). The best plan is to pay off your entire credit card balance every month. If this is impossible to do, you should at least pay a good amount over the required minimum payment.
  • One way to avoid having to rely on your credit card for unplanned purchases is to build an emergency fund. This may sound daunting, but even small amounts taken from your paycheck and funneled into a special bank account can add up over time. If you find yourself in a situation where you have an unexpected expense — say, a major car repair — having the cash on-hand to pay for it means you can either pay the expense off immediately or avoid using your card for it altogether.

If you do find yourself in debt trouble, you may want to consider a debt-relief program — but be sure to understand what you’re getting into before you sign up for one.

Bottom line

Applying for multiple credit cards can help your credit score, but if you apply for them all at once, be prepared to watch your score drop with the multiple hard inquiries and shortened credit history (if you happen to be approved for them all). Your score will eventually recover, as long as you make payments on time and keep your utilization low. However, if you’re going to be in the market for a mortgage or car loan in the near future, you may want to protect your credit score and hold off on multiple applications. The best approach is to spread out those card applications over time to minimize any major score impact.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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When To Open a Store Credit Card — and When Not To

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You’ve likely been offered the chance to apply for a store credit card while having your items rung up at a retailer’s counter, or while shopping online. Often, these offers come with the benefit of getting a good chunk — say, 10% or more — off your initial purchase.

So is it a no-brainer to take the discount and sign up?

Not necessarily. There are certainly advantages to getting a store credit card, including that initial promotional discount, ongoing rewards and the ability to use your new card as a credit-building tool. However, the downsides include low credit limits, high interest rates and deferred interest.

Here’s some info to help you decide whether getting a store credit card is the right choice for you.

What are store credit cards?

A store credit card allows consumers to receive benefits and rewards for shopping at a specific retailer.

For example, if you get a credit card from your favorite clothing store, you may get 10% or 20% off your first purchase, then continue to receive perks as a cardholder, including continuous discounts when you shop there or at related retailers, access to special promotions and events, and even birthday gifts.

There are two main types of store credit cards — those that can be used at a specific store (also known as closed-loop cards), and those that can be used at any number of retailers (open-loop cards). Open-loop cards are typically co-branded with major card networks, like Visa or Mastercard.

Gap, for one, offers a GapCard that can be used only at Gap and Gap Factory stores, while a Gap Visa card that allows you to earn rewards at any store that accepts Visa, which will ultimately can be redeemed for a Gap purchase.

Reasons to open a store card

  • Lower barrier to entry: If your credit score isn’t stellar, It can be easier to be approved for store cards than for other cards. “Retailers want to sign up as many people as possible for their credit cards, because they know if someone signs up for their card, they’re much more likely to shop regularly at that store,” said Matt Schulz, a credit card industry analyst for CompareCards, which along with MagnifyMoney, is owned by LendingTree. However, you may need a higher credit score to qualify for a co-branded card. “Often, if you apply for a co-branded store card and get denied, the store will automatically consider you for the store card, too,” Schulz said.
  • Good for credit-building: Obtaining a store card can be one way for people with low credit scores, or no credit at all, to improve or start building their credit. Once you’ve been approved for the card, using it responsibly can help you boost or build your credit, as your purchase and payoff activity will be reported to the credit bureaus.
  • Rewards: As previously noted, you can be rewarded for your use of store credit cards, getting perks that may go beyond the initial discount. If you shop a lot at a particular store, you may benefit from their card.

Reasons a store card can be risky

  • High interest: According to CompareCards, the average rate on new credit card offers is approximately 17%; however, CompareCards also noted that the average rate offered for new store card offers, in particular, is much higher — nearly 25%. If you don’t pay off every purchase when your bill is due, you can really rack up the interest-related debt. “Store card APRs are very high because issuers know that making the card available to folks with crummy or thin credit means greater risk for them,” noted Schulz. “Higher APRs are a way for the banks to protect themselves against that risk.”
  • Deferred interest: You may be familiar with the 0% promotional periods offered by traditional credit cards — that is, a time during which you can carry a balance without paying interest. Deferred interest offered by a retailer might seem like the same thing, but it’s not. Deferred interest periods do indeed allow you to carry a balance without paying interest, for a time. However, when that period ends, if you haven’t paid off the card in full, you’ll be on the hook for paying interest not only for the balance that remains, but for the entire original purchase.
  • Low credit limits: While store cards can help you build your credit, their often-low credit limits may be a negative for your utilization ratio if you do not have many — or any — other cards. Your utilization ratio is the amount you owe on your cards compared to your total credit limit, and is an important part of your credit score. It’s generally recommended that you keep a utilization ratio below 30%. — for example, if you have a store credit card with a $500 limit, and you charge $250. If the store card is your only card, this relatively small purchase will put your utilization ratio at a hefty 50%, which could ding your credit score. (If you do have other cards, however, getting more credit can be good for your utilization ratio, as your credit score considers individual card utilization as well as the utilization used across all your cards).
  • Limited use: If you get a closed-loop card, you are limited in the purchases you can make with it.
  • Could trigger your shopaholic tendencies: If you’re prone to making frivolous purchases, getting a store card may prompt you to spend more to try to get the rewards offered. It’s never a good idea to buy items you don’t really need simply to get rewards, as you’re still spending money you didn’t have to in the first place.

How to tell if the discount is worth it

Some people might sign up for a store card just to get that promotional discount, with no plan to use the card again after their initial purchase. This may be a good move — if you pay that card off right away. However, if you carry a balance, any discount you receive will be negated by interest charges you’ll incur.

“The APRs are just so high that the math can work against you in a big hurry, even if you get a good discount initially,” Schulz said. “It doesn’t take an accountant to understand that paying 25% to save 15% isn’t a good deal.”

Let’s look at an example. Say you make a $300 purchase and get 15% off. That’s $45 off, bringing your bill down to $255. Sounds good, right?

Now let’s say the APR on the card is 25%, and, instead of paying off that balance right away, you make monthly payments of $15. Over the time it will cost you to pay off your card (22 months), you’ll pay $63.09 in interest, wiping out your initial discount.

Bottom line: It’s best to pay your card off right away, or at least make larger monthly payments, to reap the benefits from that promotional discount.

What’s the best store credit card to get?

If you’re considering a store card, look for those with no annual fee, as low an APR as possible and good perks. If you can qualify for a co-branded card, their flexibility can often help you rack up rewards faster. Overall, more general rewards cards may be a better bet than individual store cards, if you can qualify.

Schulz recommends you don’t jump into applying, or feel pressured by a store employee to get a card.

“Take a flier, read about the card at home and then, if the card still sounds good to you, apply the next time you go to the store,” he said. “Chances are all the same perks will still be in effect and you’ll be making a much more informed, less pressure-filled choice.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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