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How Applying for Multiple Credit Cards Affects Your FICO® Score

Having multiple credit cards can be a positive for your credit history, but if you're not careful, it can do more harm than good.

When used responsibly, credit cards can provide a lot of value in the form of rewards and perks. Using more than one can make it easier to maximize the value you get from each card.

But applying for multiple credit cards, especially in a short period, and using them regularly can impact your FICO® Scores.

Why You Might Want Multiple Credit Cards

It might not seem necessary to have more than one credit card, and for many people, it's not. But there are some reasons to consider having several cards in your wallet.

For many people, it comes down to credit card rewards. If you're paying your bill on time and in full every month, you can get a lot of value out of credit card sign-up bonuses and ongoing rewards.

Each credit card will usually have its own set of rewards rates. If you spend a lot on groceries, some cards offer more cash back, points, or miles in that spending category. But if you also spend a lot at restaurants, you may want another card that rewards you more for dining purchases.

The same goes for credit card perks. Travel cards, for instance, offer a wide variety of benefits. With hotel cards, you can often get a free night's stay every year when you pay your annual fee, plus complimentary elite status with the hotel brand. If you add in an airline credit card, you may also get free checked bags and priority boarding.

Finally, some credit cards offer other features that you may want to take advantage of. For example, if you need to finance a large purchase and pay it off over time or pay down a high-interest balance, many cards offer introductory 0% APR promotions that can save you money.

How Multiple Credit Cards Can Affect Your FICO® Scores

Whatever your reason for getting more than one credit card, it's important to consider how applying for and using multiple cards may affect your FICO Scores. Let's walk through each of the five factors that influence your score's calculation.

Payment History

Just applying for credit cards won't impact your payment history, but if you're using several cards regularly, it's easy to get overwhelmed and forget to make a payment. Even one payment that's late 30 days or more can have a significant impact on your FICO® Scores.

The best way to avoid missing your due date is to set up automatic payments from your bank account. Just be sure to have enough cash in your account at all times, so you don't get slapped with an overdraft fee or returned payment penalty.

Also, keep in mind that making on-time payments on all your cards can have a positive impact on your credit score.

Amounts Owed

The total amount you owe factors into your FICO® Scores. Your credit utilization is one of the elements that determine this factor. The credit utilization ratio is the percentage of available credit you're using on your credit cards at a given time.

For example, if you have just one card with a $5,000 balance and a $15,000 limit, your credit utilization ratio is roughly 33%. Add a second card with a $4,000 balance and $5,000 limit, and your ratio is 45%. The lower your ratio, the better it is for your FICO Scores.

When you add new cards to your wallet, your available credit increases, which could drive down your credit utilization rate. However, if you rack up a lot of debt because of the increased accessibility to credit, it could end up doing more harm than good. It's important to note that even if you pay off your balances in full each month, the balances that go into your credit utilization calculation are the balances that appear on your credit report. Typically, the statement balance is the amount the appears on your credit report.

Length of History

The longer you've been managing credit, the more information lenders will have to determine your creditworthiness. Part of this factor incorporates your oldest credit account — which means it's generally good to hold onto old credit cards and to use them periodically, say once a year, to keep them active.

But another aspect of your length of credit history is your average age of accounts. Let's say you have two credit cards, one you've had for ten years and another you've had for three years. Between the two of them, your average age of accounts is 6.5 years.

If you open two new credit cards in quick succession, though, that average drops to 3.25 years.

The higher your average age of accounts is, the better, because it shows that you keep and manage credit accounts well over a long period. If your average is low, it could indicate more risk.

New Credit

Each time you apply for credit, the lender typically runs a hard inquiry at one or more of the credit bureaus. In general, an inquiry can reduce your FICO® Score by several points.

But FICO has found that opening multiple credit accounts in a short period of time represents a higher level of risk to potential lenders. So if you apply for multiple credit cards in a short period, it could have a negative compounding effect on your score and also your ability to obtain credit in the near future.

One thing to keep in mind is that while hard inquiries remain on your credit reports for two years, only those in the past year affect your FICO Scores.

Credit Mix

Your mix of credit refers to the types of credit accounts you hold. Lenders like to see that you can manage different types of credit well. For example, having credit cards, an auto loan, a mortgage loan, and student loans can be more appealing to lenders than if you only have credit cards.

Of course, you don't need to go out and apply for different types of credit just for the sake of having a diverse mix of accounts. Rather, as you naturally borrow money for different purchases, your credit mix may improve.

How to Manage Multiple Credit Cards Responsibly

Once you have a strategy in place, it can be achievable to manage several credit cards, even if you're not using them all at the same time. Here are some tips to help you get on the right track:

  • Set up automatic payments on each account and make a note of the due dates.

  • Consider asking the credit card companies to change your due dates so they all fall on the same day each month.

  • Pay your credit card bills in full to avoid interest charges, which can neutralize any value your cards offer.

  • Use budgeting software that imports your transactions into one place, so you can view each account side by side.

  • Try to space out your credit card applications to avoid a more significant negative impact on your FICO® Scores.

As you take these steps and stay mindful of your credit, you can use multiple credit cards to achieve the goals you have for them, whether it's travel, cash back, perks, and more.

Ben Luthi

Ben Luthi has been writing about money and travel for seven years. He specializes in consumer credit and has written for several major publications and industry leaders, including U.S. News and World Report, Fox Business, Wirecutter, Experian, and Credit Karma.