Does Applying For A Credit Card Hurt Your Credit Score?

Applying for a credit card will unlikely hurt your credit score. If you're approved and use a credit card responsibly, it can actually improve your credit score. But applying for multiple credit cards at one will most likely ding your credit score by a few points.

Does Applying For A Credit Card Hurt Your Credit Score?

Everybody should have at least one rewards credit card in their wallet. If you can't decide which one, it's best to get a cash back credit card so you can use your cash for anything, including paying down your credit card bill.

Finally, you might want a great travel rewards and dining credit card if you are a jet setter who enjoys the finer things in life. As someone who has traveled to over 60 countries, I love to travel and see the world.

Another great type of credit card to get is a 0% APR card for balance transfers. With 0% APR, you pay no interest on your purchases or transfers usually for up to one year. It's a great way to save money.

Don't Apply For Too Many Cards At Once

Does applying for a credit card hurt your credit score? If you do it frequently and irresponsibly, yes. But if you space out your applications and pay your bills on time, you can use credit cards to improve your credit score.

With all these amazing rewards credit cards, it can be tempting to apply to two or more at the same time. But, I recommend only applying to one rewards credit card every three months at most in order to protect your credit score.

Let's first look at the components that make up your credit score. And then will see how applying for too many credit cards at once might negatively affect your credit score.

Variables That Make Up Your Credit Score

Your credit score is what lenders and other parties use to find out if they should grant you credit. Landlords will check your credit score and credit report to make sure you are creditworthy enough to rent to. Banks will check your credit score to see what mortgage rate they should charge you. Auto dealers will check your credit score as well.

The best credit cards also generally require a minimum credit score of 690 to qualify. In fact, the average credit score for qualified mortgages nowadays is 760.

There are five components of your credit score:

  1. Payment history (35%)
  2. Credit utilization (30%)
  3. Length of credit history (15%)
  4. New credit/Credit inquiries (10%)
  5. Credit mix (10%)

Applying for multiple credit cards primarily affects two of the categories: 1) credit inquiry and 2) credit utilization.

Credit utilization composes 30% of your credit score while credit inquiries are only 10% of your credit score. Therefore, you don't want to apply too often, otherwise, the credit agencies will wonder what is up with your finances.

Related reading: Credit Cards vs Personal Loans: Which Is Better?

Credit Inquiries Affect Credit Score

Each time you apply for a credit card, there is a hard inquiry placed on your credit report because the potential lender has actually pulled your credit report. A hard inquiry may or may not affect your credit score.

Please note that a hard inquiry is what counts, and not a soft inquiry. A soft inquiry occurs in cases where you check your own credit or when a lender or credit card company checks your credit to pre-approve you for an offer. Soft inquiries do not appear on your credit report and do not impact your credit scores.

A lot of hard inquiries is a red flag because other lenders who pull your credit report can see these hard inquiries. They will wonder whether you are in desperate need of credit because you are running out of money or have some hidden debts.

Hard inquiries on your credit score have the following two impacts:

  • Each time you have a hard inquiry, it will remain on your credit report for two years but will only impact your credit score for one year.
  • Each time you have a hard inquiry, your credit score will be impacted by a few points. The fewer accounts and shorter credit history you have, the bigger the impact.

Given the facts about a hard inquiry, if you want to be absolutely conservative, then you should only apply for a credit card you really want once every year.

But if you have a good credit score (720+) and a long credit history (10+ years), then it's OK to apply to a credit card every 3 – 6 months.

Credit Utilization Also Affects Your Credit Score

Credit utilization is 30% of your credit score and is therefore 3X more important than credit inquiries.

The key is to keep your credit utilization rate to under 30%. In other words, if you have $1,000 worth of credit, spend no more than $300 a month and pay it off in full.

If you open two new credit card accounts, that will raise your credit limit and improve your credit utilization. It might also cause a small hit to your credit score due to two hard inquiries.

Your credit utilization ratio is how much debt you owe on your credit card compared to your credit limit. If you have a credit limit of $10,000 and you owe $2,000 on the card, your credit utilization ratio is:

  • Credit Utilization = $2,000/$10,000 = 20%

Even though your credit utilization ratio will improve if you open multiple credit card accounts, you may find that lenders are concerned with your ability to make the payments on several cards.

So long as you keep your credit utilization ratio to under 30%, you should be on the way to building an ever higher credit score.

Average Credit Score By Age Chart

Apply For Credit Cards And Use Them Wisely

Getting a credit card is a great way to improve your credit score over time. In fact, payment history accounts for about 40% of your credit score. Therefore, all you've got to do is be a responsible credit card user for a long time and your credit score will go up.

If you have multiple credit cards, pay off your balances in full every month to keep your credit utilization ratio as low as possible. Remember, 30% is the magic credit utilization ratio.

Does applying for a credit card hurt your credit score? Not if you do it the right way

In terms of the proper number of credit cards to own, that's up to you. I like to own three credit cards because that's all I like to keep track of. Further, three credit cards help me concentrate my rewards points for travel, dining out, and cash back. Some people have 10 credit cards for every occasion. I think that's very inefficient.

The last thing you want is to have so many credit cards that you lose track of them. Does applying for a credit card hurt your credit score if you have too many credit cards and can't keep track, yes. One missed payment will stay on your record for at least six months, if not a year.

Avoid applying for a new credit card more than once every 90 days. The signup bonuses and other rewards are very tempting. But resist. There will always be new bonuses in the future that you can take advantage of.

The Best Credit Cards To Own

Below are my top three favorite rewards credit cards to own for cash back, dining/entertainment, and travel. I've spent dozens of hours reviewing hundreds of cards so you don't have to.

Best Cash Back Credit Card: Capital One Quicksilver Cash Rewards Credit Card

The Capital One Quicksilver Rewards Credit Card is the best cash back credit card today. Cardholders earn 1.5% cash back on all purchases without any spending caps.

No spending caps is key because many other credit cards will stop accruing rewards points when you spend more than a specified dollar amount in order to limit how much you can earn in cash back rewards.

The average cash back credit card only provides 1% cash back on all purchases. Therefore, the Quicksilver card provides a 50% greater reward.

Key Benefits

  • Welcome Bonus: $200 cash bonus after spending $500 on purchases within three months
  • Rewards Rate: Flat-rate 1.5% cash back on all purchases
  • No foreign transaction fees
  • Annual Fee: $0
  • Introductory 0% APR for the first 15 months
  • Credit Score Needed: Good to Excellent
CapitalOne Quicksilver Cash Rewards Credit Card

Best Dining/Entertainment Credit Card: Capital One Savor

Capital One is a winner again, partly because their specialization is in credit cards. The Capital One SavorOne card is a tiered cash back rewards credit card that offers an impressive 3% on dining and entertainment without any spending caps. 3% with no spending caps is huge and will really add up over time.

My wife and I go out to eat three to four times a week on average and put everything on our dining and entertainment rewards credit card. Our food budget is roughly $2,500 a month, which means we are able to get a three free dinners every month thanks to our rewards credit card.

Key Benefits

  • $200 sign up bonus if you spend $500 in the first 3 months
  • No annual fee
  • 3% Cash back on dining and entertainment
  • 2% Cash back at grocery stores (excluding superstores)
  • 1% Cash back on everything else
  • 0% APR for the first 15 months
  • No foreign transaction fees
  • Rewards don’t expire as long as you your account is active
  • Access to premium experiences like VIP tickets, 5 star meals and more
  • Complimentary concierge service 24/7
  • 24-hour travel assistance, travel accident insurance, and more

Best Travel Rewards Credit Card: Chase Freedom Unlimited Rewards Card

I've been a happy Chase customer and cardmember for over 10 years. I've traveled to over 60 countries during this time period and have always used my Chase Freedom Unlimited Rewards Card to rack up mileage rewards. We've used our rewards points to travel to Hawaii for free every other year since.

If you enjoy traveling like we do, you want a great card that has no foreign transaction fees, great rewards, and travel protection. It feels great to have a team of people in the background looking out for you.

Key Benefits

  • Great cash back percentage: Earn unlimited 1.5% cash back on all purchases
  • Annual fee: $0
  • Sign up bonus: Get a $200 bonus after you spend $500 in the first 3 months
  • Bonus cash back categories
  • 5% cash back on travel purchased in the Chase Ultimate Rewards® portal
  • 3% cash back dining at restaurants and eligible delivery/takeout 
  • 3% cash back on eligible drugstore purchases
  • Rewards don’t expire as long as your account is open.
  • 0% APR for the first 15 months
  • Credit score needed: good to excellent 
  • No minimums to redeem for cash back
Chase Freedom Unlimited

So now that you know the answer to applying for a credit card hurt your credit score, use credit cards to help you.

Every time you use a rewards credit card, you'll feel great knowing that you're getting bonuses that will eventually lead to free travel, free food and entertainment, and free cash.

If you're going to spend money anyway, you might as well put all your spending on one of your rewards credit cards. Always take advantage of credit cards and never let credit cards take advantage of you.

Pay off Your Debt Faster

If you don’t have enough cash, getting a personal loan from Credible is a good place to start.

Personal loan rates have come down significantly in comparison to the average credit card interest rate. Thus, if you have expensive credit card debt, consider consolidating your debt into a lower interest-rate personal loan.

Credible has the most comprehensive marketplace for personal loans. Up to 11 lenders compete for your business to get you the best rate. Get real personal loan quotes in just two minutes after you fill out an application. Check out Credible today and see how much you could save.

For further suggestions on saving money and growing wealth, check out my Top Financial Products page.

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