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Apply For Credit Cards, But Not Too Many

Dec. 19, 2014
Credit Card Basics, Credit Cards, Credit Score
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Oops! You succumbed to temptation too many times, and opened up enough new credit cards that your score suffered. It’s a common mistake, since credit card offers like free airline miles, free hotel stays and generous cash gifts are designed to be alluring.

Why is it bad to open too many cards? 

When you apply for a new credit card, the issuer checks your credit to see if you’re a good risk. 10% of your credit score is determined by how many inquiries have been made on your record recently, so your score can temporarily go down if you open a lot of cards in quick succession.

Having six or more recent credit inquiries makes card issuers and other lenders nervous because they’re a predictor of bankruptcy, according to the consumer credit analyst, FICO.

10 percent of your credit score isn’t so bad, right? Unfortunately, there’s a second category in your credit score that’s affected by opening new cards. 15% of your score is determined by the length of your credit history — and that includes the average age of all your accounts. Having a lot of new accounts brings that number down, causing your credit score to dip temporarily.

What’s the solution?

Only time will heal this wound. Your credit score should bounce back when the credit inquiries are not quite so recent. It takes about two years for inquiries to disappear from your record. Over time, the average age of your accounts will also go up, bringing your score up even more.

In the future, think carefully about your overall credit picture before you apply for a new credit card. Try not to open new cards more often than once every six months or so, depending on your financial circumstances. It may be worth keeping your longest-standing accounts open because they contribute to the average length of your credit history.

You should also be cautious about trying to juggle too many cards. Paying bills on time has a bigger impact on your credit rating than anything else, accounting for 35% of the score. People with too many cards run the risk of losing track of some of the payments, and carrying a balance on many different cards can also hurt you. And as always, don’t forget to work on reducing your overall debt load.

There is one silver lining. If your new cards increased the amount of available credit you have, that brings your score up.

» MORE: How to apply for a credit card so you’ll get approved

And the upshot is …

Don’t panic. Filling out too many credit card applications isn’t good for your credit score, but it’s not as bad as failing to make on-time payments. Keep your debt levels low, pay your bills on time, and your credit score will recover from your new-card spree.