Applying for credit cards can help or hurt your credit score. How often you apply for credit cards has the largest negative effect on your credit score. You should never fill out credit card applications just to see if you can get approved. Open credit card accounts only when you need them or wish to increase your spending versatility.
Building Your Credit
Multiple open credit card accounts can be good for your credit score as long as you use these cards responsibly and pay off the balances each month. Multiple cards can help you build your credit score by establishing your credit history in the long term, according to MSN Money Central. Potential creditors only view multiple open credit accounts as a problem when you show an inability to pay down your balances quickly. The longer you are able to use credit responsibly, the better your credit score looks.
Credit Report Inquiries
Obtaining multiple credit cards may cause an upswing in the number of inquiries into your credit report. Creditors tend to ignore a higher rate of credit inquires over a 30-day period because creditors don't want to penalize you for simply shopping around to find the best interest rate for a credit card, according to Experian. Be careful not to extend your search for a credit card past this 30-day benchmark. Excessive inquiries into your credit report can cause your overall credit score to drop.
Assign Roles for Cards
Multiple credit cards allow you to assign spending roles for each credit account. One card should be used for everyday purchases like groceries and gas. The card with the lowest interest rate should be used for large purchases since the card's low interest rate allows you to pay down its balance faster. You should keep a credit card with a zero balance in a safe place other than your wallet or purse. This provides you with some spending power in the event your belongings are stolen.
Obtaining Credit Cards
It isn't necessary to obtain all your credit cards at once. You may elect to obtain just one card at first, use it responsibly for six months to a year, then apply for a second card using your improved credit score granted to you by your responsible spending habits. You're permitted under the Fair Credit Reporting Act to view your credit score for free once every 12 months. You can view your credit score, see how it's performing with your new card and elect to obtain a new credit card once your score is on the rise.
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