Comparing and securing favorable financing deals requires strategic planning. To find the best offers available, it’s advisable to fill out applications with multiple lenders, especially for mortgages, auto loans, and student loans, within a short time frame. However, the approach differs when it comes to credit cards. Applying for several credit cards consecutively can negatively impact your credit score.
Thankfully, there are alternative methods to compare credit card offers without risking your credit score. Understanding how to shop for the best credit card deals without hurting your credit is essential. By employing these methods, you can make informed decisions while safeguarding your financial standing.
Reasons why you shouldn’t apply for multiple credit cards at a time
Credit inquiries have a limited impact on your credit score, but excessive applications for new credit can potentially harm your creditworthiness.
The FICO scoring system, widely used by top U.S. lenders, allows for rate shopping when applying for mortgages, auto loans, or student loans. In these cases, multiple credit inquiries within a 14-day window (or 45-day window with newer models) will be treated as a single event.
However, this special consideration does not extend to credit card inquiries. If you apply for multiple credit cards simultaneously or in close succession, it may negatively affect your credit score.
What happens when you apply for a credit card?
When applying for a credit card, the issuing bank reviews your credit report from agencies like Equifax, Experian, or TransUnion. This helps them assess the risk involved in doing business with you. Meeting the card issuer’s minimum qualification standards based on your credit and application details makes you eligible for a new account.
Your credit report and score, among other factors, may also influence the terms of your new account. Credit card issuers tend to offer better benefits and lower APRs to applicants with good to excellent credit ratings.
Whenever a creditor accesses your credit information through a credit bureau, a record of this access is added to your credit report as a credit inquiry.
Credit inquiries can be categorized as “hard” inquiries when you seek financing. These hard inquiries can potentially have a negative impact on your credit score as per credit scoring models like FICO or VantageScore.
Hard credit inquiries have a lifespan of up to 24 months on your credit report but only affect your FICO Score for up to 12 months. Additionally, they account for only 10% of your credit score, making them a minor factor compared to essential details like payment history, which holds a 35% weight in your FICO Score calculation.
How to secure credit without mass-applying
Reviewing your credit details is an essential first step in your credit card search. When you check your own credit report, it results in a soft credit inquiry, which doesn’t affect your credit score. You can obtain credit reports from Equifax, Experian, and TransUnion to understand where your credit stands. Although these reports don’t include your credit score, you can still check your score for free without damaging it.
Once you have a clear picture of your credit standing, it’s time to research various credit card options. Look for features that align with your preferences and financial needs. While the best credit card offers typically require excellent credit, don’t worry if your credit isn’t perfect. There are credit cards designed for individuals with bad credit that you can explore.
To avoid unnecessary risks to your credit score, some issuers offer the option to check for preapproval or pre-qualification online. This process doesn’t guarantee approval, but it increases your chances of getting approved when you apply. The best part is that simply checking for preapproval won’t result in a hard inquiry on your credit report, though an inquiry will still be made if you proceed with the application.
If you find that the available credit card options don’t meet your expectations, consider making a plan to improve your credit. Although improving credit may take time and effort, the benefits of having a good credit score will be well worth it in the long run. With a better credit score, you’ll have access to more favorable credit card offers and financial opportunities.
Is it bad to apply for two credit cards at the same time?
Multiple credit cards in your wallet can offer certain benefits. While it’s not advisable to apply for multiple credit cards simultaneously, there might be situations where doing so can be reasonable. For instance, if you plan to apply for two credit cards from the same bank on the same day, the issuing bank might use a single credit report for both applications. This could potentially result in a single credit inquiry for both cards on your credit report. However, it’s essential to note that this is not guaranteed to happen, so it’s best not to rely on this possibility.
Having several credit cards can have its advantages, but it’s essential to be cautious about applying for multiple cards at once. There are circumstances where applying for two credit cards from the same bank on the same day may be justified. In such cases, the bank might use one credit report for both applications, leading to just one credit inquiry appearing on your credit report. However, this outcome is not always certain.
While holding multiple credit cards can be advantageous, it’s essential to approach applying for them with care. Applying for two credit cards from the same bank on the same day may seem tempting, as there is a possibility that the bank will only perform one credit check for both applications. This could mean only one credit inquiry showing up on your credit report. However, this is not always the case, and it’s important not to rely solely on this assumption. Each application’s approval and credit inquiry are at the discretion of the bank and the credit reporting agencies. So, it’s wise to consider the potential risks before proceeding.
