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Wait at least 6 months between credit card applications

A common question I receive from Creditnet readers is how long we should wait between credit card applications. Once consumers find out that opening and using a credit card responsibly can help them build credit, many of us (rightfully so) have an urge to rush off and apply for a small handful of cards very quickly.

Frankly, this is a bad idea. Opening too many cards at once can damage your credit profile and reputation in a couple of different ways. 

First, it makes you look a bit, well, desperate. Lenders will notice you've applied to multiple cards at once and wonder what's going on with you. One or two inquiries within a short amount of time - say a couple of weeks - shows lenders a smart, savvy consumer doing a little shopping around. Four or five applications show a sense of urgency and perhaps desperation, which in turn make you look considerably more risky in the eyes of creditors. 

You don't want to look desperate, do you? That's one reason to keep your apps at a minimum in a short amount of time.

Another reason is that multiple inquiries can hurt your score. Credit scoring models like FICO are actually smart enough to recognize a consumer shopping around, and won't penalize additionally for more than one inquiry within a couple of weeks. But multiple inquiries spread out over the course of a few months can - and most likely will - damage your credit score because every "hard" inquiry made on your profile will have a small but negative impact on your score.

Hard inquiries are the ones taken by prospective credit lenders weighing the risk of lending to you. Hard inquiries hurt your score as a means to deter you from applying to a lot of credit cards, loans, etc. 

Soft inquiries, on the other hand, occur when you check your own score, and have no impact - positive or negative - on your score.

Taking all this into consideration, we recommend waiting at least six months between applying for credit cards for a couple of reasons. The first being, again, to limit the impact of hard inquiries on your credit. The second is that hard inquiries don't just disappear from your report; hard inquiries actually stay on your credit report for two years, though they only effect your score for one year.

Ideally, you would keep the number of hard inquiries you can control to one per year, but six months at the very least keeps your financial situation from appearing desperate (remember, perception is reality) while keeping the damage done by two inquiries on your report to just a half-year. 

Ultimately you want as few inquiries on your report as possible, but at the very least you should wait six months or more between credit card applications if you can.

on Wed, 2013-07-31 08:32