Get the timing right
This is how long you should wait between credit card applications
When it comes to applying for new credit cards, good timing can make all the difference.
Maybe you’re looking to increase your credit score by lowering your credit utilization ratio. Or a new card with a great limited-time sign-up bonus may enter the market just as you’re planning your summer vacation. Sometimes, you just need more spending power.
But applying for multiple cards over a short period of time can potentially risk not only your credit card approvals but also your future success in applying for loans or receiving a competitive interest rate.
While there are no rules that state when you should apply for more credit, a good rule of thumb is to wait at least six months between applications. If you’re in the market for a new credit card, here are some things you should consider:
YOUR CREDIT SCORE
Each time you apply for a new line of credit, you should expect your credit score to take a dip.
Credit card issuers pull a hard inquiry on your score when you apply, which lowers it temporarily. According to FICO, some consumers may see up to a five point decrease in their credit score after each hard pull. And several applications within a short period of time can make those drops more significant.
If your applications are approved, your credit score may also drop due to a new, lower average age of your accounts.
Still, multiple credit accounts, including credit cards, are one key to raising your credit score. “Available credit is one of the factors that contribute to a credit score and having more than one credit card may indicate that lenders have evaluated a consumer’s credit history and determined that the consumer can manage multiple financial commitments,” says Nancy BistritzBalkan, vice president of communications and consumer education for Equifax.
Experian predicts that credit utilization rate, which is the ratio of your debt to your available credit, can influence up to 30 percent of your score.
YOUR LIKELIHOOD OF APPROVAL
Because of the effect that a hard inquiry can have on your credit score, it’s important to be confident in your likelihood of approval before applying for a new card.
“The likelihood of approval for a credit card is based on several factors including ability to pay and how well the consumer manages their debt obligations,” says Stacy Kika, a spokesperson for Wells Fargo. “In short, we look for overall good financial responsibility.”
Too many applications in a short time period can indicate to lenders that you’re a risky borrower, reducing your chances of approval. Hard inquiries remain on your credit report for two years, so any applications you submit, whether accepted or not, during that time frame can affect your risk profile.
“Consumers denied for a credit card should examine the reasons for denial and take steps to resolve the issues before submitting a new credit card application,” Kika says. Work to remedy your score or put in the time to show a history of timely payments before submitting a stronger application in the future.
Before any application, look carefully at each card’s requirements and offers to find your perfect fit.
YOUR FUTURE
Even if you come across a great limited-time sign-up bonus, it may not be worth risking any financing you anticipate applying for in the near future.
Mortgage and auto lenders consider your credit score in their determination of your interest rate. While hard inquiries don’t have the most significant effect on your score, you don’t want to risk lowering your score even a little when it can affect large, long-term loans.
“If a consumer plans to make a large purchase that requires financing, she may want to consider waiting to apply for a new credit account. Again, lenders want to see a healthy mix of credit accounts and that the consumer hasn’t overextended herself with too many financial commitments,” Bistritz-Balkan says.
Put your credit card applications on pause in favor of receiving the best interest rate you can. Thousands of dollars in potential interest savings over the lifetime of a mortgage is better than even the most attractive sign-up bonuses.
THE ISSUER’S POLICY
In some cases, your credit card issuer’s application policy can be a useful resource in determining whether to apply.
These rules, which may or may not be official issuer policy, are often set in place to reduce churning, a practice in which cardholders repeatedly open and close cards to take advantage of generous sign-up bonuses.
One of the most well-known of these churning policies is Chase’s unofficial but widely accepted 5/24 Rule.
After Chase instituted the rule a few years ago, account holders found that their applications to many of Chase’s most popular cards were denied if they had opened five personal credit cards through any issuer within the past 24 months.
Citi allows users to apply for one card every eight days but no more than two within a 65-day window, according to The Points Guy. Capital One limits cardholders to just two personal Capital One cards and will only approve one card every six months.
YOUR OTHER CARDS
Don’t forget to take a look at your wallet before submitting any new rewards card application.
Do you already have a card with similar rewards? Spreading yourself too thin with cards that offer the same rewards doesn’t make a lot of sense. Choose cards that will diversify your rewards and add value to your collection.
“Regardless of whether a consumer is applying for one card or many, she may want to consider evaluating credit card options, including which card offers the most beneficial rewards and which credit card she’s likely to get approved for,” Bistritz-Balkan says.
If you’re lured in by an enticing sign-up bonus, will you realistically be able to meet the spending requirements to get that bonus?
Don’t go into debt buying things you wouldn’t otherwise just to earn the bonus.
So . how long should you wait?
There are no rules or laws in place to limit credit card applications or the approval thereof, meaning your waiting period is largely up to you.
“Applying for a new credit card is a personal decision, Kika says. ”However, we encourage consumers to apply for a credit card whenever there is a financial need to do so and when they are confident in their financial stability.“
No magic number can tell you the perfect waiting period to guarantee approval or the lowest impact on your credit score.
Even for issuers who have set guidelines of application timelines, there are often exceptions to the rule.
What's most important is that you practice patience and don't rush into multiple applications at once. Look at your financial health as whole, think about your plans and consider the plastic you're already carrying in your wallet before making a decision.