Many consumers mistakenly believe that applying for as many credit cards as possible will result in obtaining higher credit limits and quickly boosting their credit scores. However, this is a common misconception. It is generally better to stagger credit card applications over time rather than applying for multiple cards at once. Opening several new accounts in a short period can also potentially impact your credit score.
But this doesn’t mean you should only have one credit card. As long as you can responsibly manage multiple accounts, holding multiple credit cards can actually help maximize rewards and increase available credit.
“New credit” typically constitutes about 10% of a credit score from major credit rating companies like FICO in the United States. Each time you apply for a credit card, the issuing institution usually conducts a hard inquiry, which involves checking your credit history for the application process, and this inquiry may cause a slight and temporary dip in your score.
Hard inquiry records can stay on your credit report for up to two years, but when calculating scores, FICO only considers inquiries from the past 12 months. In other words, hard inquiries older than a year may still be visible on your report but no longer affect your credit score.
Unlike comparison shopping inquiries for some loans like mortgages or car loans, applying for multiple credit cards within a short timeframe generally won’t be viewed as a single inquiry. Rapidly opening several new accounts may result in multiple separate hard inquiry records. Intensely opening new accounts within a short period may also signal higher credit risk to lenders.
Credit history length accounts for about 15% of a FICO score, incorporating factors such as the age of the oldest account, the age of the newest account, and the average age of all accounts. Opening a new card can lower the average account age, and opening multiple cards will have a more significant impact in this regard.
The impact varies from person to person, with the key factor being the proportion of “new accounts to existing accounts.” If you already have several long-standing cards, adding a new one may have a minimal dilution effect on the average age. However, if you have a short credit history and a few accounts, a new card can significantly lower the average age. For instance, if you only have one card used for two years and open a new card, your average age will be halved to one year. But if you already hold five cards with an average usage of eight years and add a new one, the average age will only slightly decrease.
One of the major incentives for obtaining a new rewards credit card is the sign-up bonus it offers, allowing consumers to accumulate cash back, airline miles, hotel points, and other rewards through purchases. These perks typically require reaching a certain spending threshold within a set time frame.
Having multiple cards means managing several spending thresholds simultaneously. For example, one card may require spending $4,000 within three months to earn 60,000 points, while another card similarly demands the same spending amount for 75,000 points, totaling $8,000 in three months, averaging around $2,667 per month.
If this exceeds your normal spending levels, striving to meet these thresholds may lead to overconsumption. Failing to meet such requirements within the deadline may result in forfeiting the rewards. Staggering application times makes it easier to meet these thresholds naturally through regular spending.
There is no strict waiting period requirement. The ideal waiting time depends on individual credit history, recent application frequencies, and each issuer’s internal guidelines (as some issuers might restrict the frequency of applications or qualifications for sign-up bonuses).
If you have recently applied for a card, waiting moderately can help your credit profile recover from the effects of hard inquiries and new accounts. It also allows you to fully capitalize on the sign-up bonus of one card before taking on the spending requirements of another.
Applying for multiple credit cards within a day can each generate separate hard inquiries and won’t be merged into one inquiry simply because they were applied for on the same day.
If multiple applications get approved, multiple new accounts will be added to your credit report simultaneously. The actual impact on your credit score varies from person to person, and there is no fixed number indicating how many points might be deducted.
It is recommended to understand the reasons for rejection before deciding on applying for another card to avoid generating another hard inquiry without addressing the previous rejection reasons.
Issuers are required to provide the main reasons for rejection or information on how to obtain such reasons. Reviewing refusal notices and credit reports can help identify factors that might lead to rejection, like high debts or incorrect data.
Before applying for another card, you can check whether the issuer provides “prequalification/preapproval” to avoid affecting your credit score through soft inquiries. Passing a prequalification doesn’t guarantee approval but can provide insight into your likelihood of being approved.
In conclusion, holding multiple credit cards itself does not harm your credit. The key is responsible management. Multiple cards can help maximize rewards for different types of spending, such as accumulating travel benefits with an airline card or getting cash back for everyday expenses like groceries and fuel.
The additional available credit can impact your credit utilization ratio, but if having more cards leads to increased debts, this benefit can be offset. If you struggle to track balances and payment due dates for multiple cards or if increased limits tempt overspending, having multiple cards may not be suitable, as interest and late fees can easily outweigh the rewards earned.
Ultimately, the ideal number of credit cards varies individually. It is best to manage a number of cards that you can responsibly handle—making timely payments, avoiding unnecessary debts. Some people may benefit from having multiple cards for various rewards, while others may find one or two cards sufficient.
(Note: This article is for informational purposes only. The Epoch Times does not provide investment, tax, legal, financial planning, real estate planning, or other personal financial advice. For specific investment matters, consult your financial advisor. The Epoch Times does not assume any investment responsibility.)