The first question that comes to mind when applying for a new credit card is how do I apply for a credit card? Can applying for a new credit card have a negative impact on your credit score? This is true whether you apply online or through the mail. In most cases, this doesn’t affect your score much since lenders don’t pull your report when they’re just checking to see if you qualify for a loan.
However, applying for multiple cards at once can cause more hard inquiries than are necessary for each application— these multiple applications will affect your score more than one would alone.
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Applying for a credit card requires a hard inquiry on your credit report
Applying for a credit card requires a hard inquiry on your credit report. A hard inquiry is a kind of inquiry where a lender reviews your credit history to determine if you are eligible for an account.
Hard inquiries are reported to the three major credit bureaus—Experian, Equifax and TransUnion—and they can have an impact on your score. The good news is that most hard inquiries don’t affect your score much at all, but each inquiry will stay on your report for two years from the date it occurred.
Hard inquiries can cause your credit score to drop, but how much?
How much your credit score will decrease depends on which scoring model you use. The most popular one, the FICO scoring model, uses information from all three major credit bureaus and assigns a score between 300 and 850.
If you have no other outstanding inquiries on your file, an inquiry can cost you 5 points. But if you have multiple of them in a short amount of time (for example, because you’re applying for multiple loans), it can be more than 10 points.
It depends on the scoring model
In other words, yes and no.
Credit reporting agencies use a variety of credit score models to determine your creditworthiness and risk level. This means that the answer is going to be different depending on which agency you ask because each one uses its own proprietary formula.
This means that even if you know your score — say it’s 850 — it doesn’t necessarily mean that every lender will accept this as a good or bad number for approving a loan or credit card application.
“Generally, the higher an individual’s credit score, the more creditworthy they’re considered,” as per SoFi professionals.
Wait before applying for a new card
If you’re planning to apply for a new credit card and want to avoid the hard pull, it’s best to wait at least 30 days before applying. Your score should recover within 30 days or less, but this also depends on the scoring model that each lender uses. If you are in the process of purchasing a home or refinancing an existing mortgage loan, however, then it might be best not to open any new accounts until after closing on these loans.
In the end, it’s a good idea to wait a few months before applying for new credit cards. This gives your score time to recover from any negative impact that may have occurred from having too many inquiries on your report. Suppose you are applying for a variety of cards at once or want to keep an eye on how these applications affect their scores. In that case, it is recommended to use some free credit monitoring service so you can see how each application affects your score in real-time!