Recently I received a question from a reader who was wondering how many cards is too many? Given my years in the credit card industry and my experience as an underwriter, I thought I would take a little time to address this question.
This question can be looked at from many angles, from the perspective of how many to apply for at once, how many to have open on my credit report, how many inquiries is too many, etc. But for the purpose of this article, I’m going to assume we are talking from the stand-point of being able to continue to be approved when doing that next round of credit card apps.
1st of all, before you apply for any credit cards you should have an idea where your credit score stands. You should also have some good basic knowledge of how your score is calculated as well. If you are not very familiar with the basics of credit scores, you need to read Credit 101 or head over to MyFICO.com. You can get your actual FICO score from MyFICO.com but you will be charged $14.95/mo if you don’t cancel w/in 10 days and the score is only based on the Equifax credit file. You can also check out a representation of your Transunion credit score at TrueCredit.com (provided by Transunion). Citi also offers a great service called Identity Monitor that will give you credit scores from all 3 bureaus. Keep in mind that the only true FICO score is the one from MyFICO as FICO is trademarked and its scoring models are not publicly available.
As we all know, credit card sign-up bonuses are the fastest way to rack up huge sums of miles and points. But if you don’t know what you are doing, you could kill your credit and risk not being able to take advantage of future offers.
We all hear everyone stating to wait 90 days between apps but how many cards should I apply for at a time?
Every time you apply for credit the bank does a hard inquiry on your credit report which will show for the next 2 years although the inquiry itself doesn’t affect your score after 12 months. But you should know that the bank can still see inquiries back 24 months. You can see how many inquiries you have when you review your credit report. Don’t worry about the soft pulls/inquiries as they do not affect your score and banks cannot see them.
1st of all you need to ensure you can easily cover all minimum spending on the new accounts before you apply. If you only hit the minimums on 2 out of 4 cards you have completely wasted your time and taken a small ding on your credit report for nothing. Further more, you potentially may not be able to get approved for the bonus offer next time as you have already had that card (time-frames vary from bank to bank)
2nd you need to spread the applications around between banks. Different banks pull credit from different credit bureaus or any one of the 3 at random. One example is Barclay’s which tends to use mainly Transunion. By spreading the apps among banks you decrease the chances of all the inquiries going on one credit report.
But I’m sure what the reader really would like is for me to give a specific set number. The problem is that it is all relative. When you apply for a credit card, your application and credit report are run through a program which does a rough evaluation of your credit worthiness and risk assessment. The set criteria varies from bank to bank but in regards to the number of inquiries that it takes to cause a decline can fluctuate a little based on credit score. A certain range of score may allow for x number of inquiries in the last 12 months but a higher range might allow for slightly more.
It also depends on how long ago those inquiries were. If you have a total of 12 inquiries on your file but half of them are over 12 months ago, this will be looked on more favorably than if all 12 are w/in the last 6 months.
Another factor that affects how negatively the inquiries are looked at is your credit utilization ration. In other words the percentage your total balances are of your total credit limits. Someone who is utilizing 70% of their limits is not going to be given as much leniency on the number of inquiries as they will appear to be more desperate. However someone who is only using 10% of their limits looks less desperate even with several inquiries.
So then what do I suggest?
I try to limit myself to 3 applications every 3-4 months. It is key that they all be on the same day. This keeps the banks from seeing the new inquiries from the applications you just finished doing prior. I don’t force myself to apply every 90 days like some people. If you think you have to do a round of apps just because it has been 90 days, you might end up applying for offers that aren’t really the best offers, but rather just the best offers that day or week. Also by limiting yourself, you are a little more flexible to apply for that occasional mega bonus offer when it comes up.
As always, if you have a question feel free to comment or email me and I will respond as soon as I can!