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In this article:
- Multiple Credit Card Applications Pose a Credit Risk
- How Long to Wait? Depends on Your Situation
- Timing It Right
It's wise to wait about six months between credit card applications, since multiple applications submitted in a short time can damage your credit.
The precise amount of time to wait depends on your circ*mstances. But particularly if you're rebuilding credit or you're shopping for a mortgage, aim to put as much time as possible between credit inquiries. If you're applying for a new card because your last application was denied, that's a signal to investigate ways to improve your credit before applying again.
Here's how to determine the length of time to wait between applications for credit cards.
Multiple Credit Card Applications Pose a Credit Risk
The number of new credit accounts in your name and the number of recent applications for new credit account for about 10% of your FICO® Score☉ . While that makes them a less significant component than payment history (worth 35% of your score) or credit utilization and amounts owed (30%), submitting multiple credit card applications within a few months can lead to a brief but potentially significant drop in your credit score.
Every time a lender checks your credit history as part of a credit application—whether it's accepted or rejected—that request appears on your credit report as a hard inquiry. Lenders consider several applications for credit cards around the same time as a sign that you may not be a responsible user of credit, and that you could be applying for credit lines you can't afford. A large number of hard inquiries for credit cards is a red flag.
That's generally not a reason to avoid credit card applications altogether. One hard inquiry typically leads to a score drop of just five points or fewer, and it affects your credit less over time. It will come off your credit report entirely after two years. More than one inquiry in a short time period, however, will likely have a larger effect on your score, and lenders in the future may deny you credit based on the perceived risk.
It's important to note that hard inquiries for credit card applications are treated differently from those that appear due to rate shopping for a specific loan type, such as a mortgage or car loan. Because looking for the best loan rate is seen as positive credit behavior by the credit scoring models, all rate shopping inquiries made within a short period of time (two weeks to be safe) are counted as one by the scoring models. They do not treat credit applications the same, however; every credit card inquiry is counted individually when calculating your credit score.
How Long to Wait? Depends on Your Situation
While it's sensible to limit the number of credit card applications you submit overall, these circ*mstances make it particularly important:
- When you're improving damaged credit: As you rebuild credit, every credit action you take should put you on the path to a strengthened score. A hard inquiry can curb the progress you make by leading to a credit score drop, however slight. Avoid new credit applications unless you're seeking a secured credit card (or a credit-builder loan) that specifically aims to bolster your score. After that, wait a minimum of six months between credit card applications so that you have time to improve your credit before a new hard inquiry appears on your credit report.
- Before or during the mortgage application process: When you apply for a mortgage, lenders look closely at your debt-to-income ratio (DTI). That means taking on new credit card debt before or while applying for a mortgage will increase your DTI and potentially affect your likelihood of approval. Plus, the hard inquiry could also lower your credit score, and every point counts during the mortgage process. The higher your score, the more likely you'll get approved and the better rates and terms you'll receive.
On the other hand, there are times when applying for a few credit cards around the same time is not as big of a risk:
- When you seek a higher credit limit or more rewards: Having multiple credit cards can actually improve your credit score if you have access to a higher total credit line but keep your spending to a minimum. This requires limiting spending on an ongoing basis and keeping up other positive behaviors like paying all bills on time. Also, you may seek a credit card to make use of certain rewards. Assuming your credit is otherwise healthy, and you're not shopping for a mortgage, taking the hard inquiry and temporarily losing a few points on your credit score may be worth it.
- When you're new to credit: If you're building a credit score from scratch, increasing your available credit by holding a few credit cards can help. That means applying for two credit cards, for example, may be worthwhile, even if your score is then affected by hard inquiries. But future lenders will consider you less of a risk if you wait about six months between applications, so consider doing so if you want to cover your bases.
Timing It Right
Your specific credit score and goals for your new credit card will help you make the final determination on timing. But since lenders reward careful management of credit, use caution whenever you consider taking on a new credit card. That's especially true if you're thinking about applying for a mortgage or otherwise need to demonstrate as high a credit score as possible.
If you're not sure where your credit stands, consider getting your free credit score and report from Experian. Then you'll have a better understanding of how to improve your credit score if necessary. This could help you get approved for credit cards and loans in the future, and boost your overall financial health.
