There are many reasons to apply for a credit card. Maybe you’re interested in earning travel rewards. Maybe you need to build up your credit score so you can one day buy a house. Regardless of why, if you care at all about your ability to access credit when you need it in the future, you probably have some questions.
If you find yourself wondering, “Will my credit drop after applying for a credit card?” the short answer is yes, but the long answer is what matters. It’s true that the simple act of applying will knock your score back a few points initially, but you can determine whether the overall effect is positive or negative. Here is a closer look at how applying for a credit card affects your overall credit.
Not All Credit Checks are the Same
There are many misconceptions around credit checks. Some people assume that every credit check lowers your credit score, but that assumption assumes that all credit checks are the same. In reality, there are two types of credit checks: soft inquiries and hard inquiries.
Soft inquiries occur when someone runs a credit report on you as a part of a background check, say for a new apartment or job. Because these inquiries aren’t related to an application for new credit, they don’t show up on your credit report. Hard inquiries, on the other hand, are related to applications for credit where you’ve given a lender permission to check your credit history. These types of inquiries will affect your credit score.
Examples of hard inquiries include mortgage applications, student loan applications, car loan applications, and credit card applications. Examples of soft inquiries include checking your own credit report, pre-qualified credit card offers, and employer background checks.
How Many Credit Cards Should I Apply For?
While applying for a credit card will almost certainly lower your credit score a bit at first, as long as you’re diligent about using the card and paying your monthly bill on-time, your credit score will actually improve beyond what it was prior to your application. However, the same practical wisdom does not hold true for multiple credit card applications. When you apply for more than one credit card in a short amount of time, your credit score will take a much more significant hit that will also last longer. Why?
Lenders view someone who fills out a lot of credit card applications in a short amount of time as a risky credit bet. To them, such behavior implies desperation and a possible reckless relationship with spending. Lenders aren’t eager to sign up every borrower who asks; only those they believe will repay them. To protect your credit score, then, be sure not to apply for more than one credit card at a time. Practically speaking, that means to wait at least six months between credit card applications.
Does It Matter Whether or Not I’m Approved?
It probably matters to you whether or not you’re approved for a credit card, but it won’t affect your credit score. There is a caveat, however. As we just learned: Applying for more than one credit card in a short period of time isn’t a good credit move. So what should you do?
Only apply for a credit card you’re pretty certain you can get. That way, you lower the odds of being rejected and needing to apply again, further lowering your credit score.
At TDECU, we have a number of credit cards available, and all of them clearly show what type of credit you should have before applying. If you’re someone with bad credit or no credit, consider our Classic Mastercard® with no annual fees and an APR as low as 7.99%. You can even apply online. All you’ll need to do is provide some basic information, including your name, address, social security number, employment information, and the like. We’ll need a government issued ID, and after we’ve run a credit report with Equifax, we can let you know if you’ve qualified for one of our credit cards or not.
Overall, it’s not bad for your credit to apply for credit cards, so long as you don’t apply for too many in a short time, and you manage your money well enough to stay on top of any debt you carry on them.