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How applying for credit cards affects your credit score

Updated on October 15, 2014

A simple inquiry affects my score?

Did you know that simply applying for a credit card can negatively impact your credit? Even if you don't follow through and actually accept the credit card, just the inquiry alone can have an impact on your credit score.

Maybe you didn't apply for just one credit card. Maybe you applied for 2 or 3 or 25? What we want to know is do these inquiries compound and negatively affect your credit score. In other words, if you continue to fill out more credit card applications does your credit score continue to go down?

To run the different scenarios, we need a test case

Meet Maxwell. Maxwell is an over-worked, angry, middle-aged accountant who works late hours, weekends and holidays because he hates his brainless, high-maintenance, nothing-is-ever-good-enough, needy, buy-me-a-bigger-house, pool-boy-loving wife and thinks his kids are entitled, self-righteous, the-world-revolves-around-me, little snots that don't respect him at all. But none of that matters because this is about his credit. Poor guy.

So, Maxwell will be our test case. For our test, let's assume that Maxwell is 40 years old. He has one credit card that has a $5,000 limit and he carries a balance of $500. Maxwell has been using credit cards for 20 years. To keep things super-simple, Mr. works-too-hard has no mortgage and he has never missed a payment. Finally, he has not had a tax lien, repossession, bankruptcy, blah, blah, blah in the last 10 years. This guy is pretty clean, at least credit-wise.

By the way, what we just discussed are the static test parameters. The only thing that will change is the number of credit card applications Maxwell applied for in the last year.

We all want to know!

How many credit cards do you have?

See results

What's going to happen to Maxwell?

No worries. Maxwell will be fine. It's his life we are worried about. We are simply going to run a few test scenarios using Maxwell's credit history and see what the impact will be to Maxwell's credit score. Now the calculation is super-secret, but there are plenty of credit score simulators available online. I will be using the one made by FICO for my test results. Incidentally, the score simulator is a range, so we won't know the exact score.

How many credit cards has Maxwell applied for in the last year?

# of Applications
Score Range
6 or more

Any conclusions? What have we learned?

So, the data shows that the credit score really cares about your 2nd and 3rd credit card applications. Your score is not really affected with one credit card application. Once you hit 3 credit card applications, most of the damage is done. Now you can go hog-wild with credit applications and the impact appears to be minimal.

One thing you might have noticed about our test case, Maxwell, is that he has been using credit for 20 years. Lets say he is new to credit. However, you cannot be that new to credit because a credit report with less than a year's worth of history is not enough to calculate a credit score. So lets change Maxwell's use of credit from 20 years down to 5 years. Let's re-run our above test and see what we get.

How is a much younger Maxwell affected?

# of Applications
Score Range
3 to 5
6 or more

Do you see the difference?

If you have a shorter credit history, your over all score is lower which is obvious. It appears that the credit score is dinged 35 points when we changed his credit history from 20 years to 5 years.

What is interesting is the overall negative impact for multiple credit card applications is less! Look at the top table and see the 15 point drop between application 2 and 3 is only a 10 point drop for the bottom table. So a shorter credit history actually helps you when you apply for a bunch of cards. Good Job, younger Maxwell. Looks like you had something going for you 15 years ago.

The more you know, the better you are off

So overall, 2 to 3 credit inquiries a year produces the maximum hit to your credit score. You also know that the a longer credit history and more credit inquiries will cause a bigger drop in your credit score. Finally, you found out that you wouldn't want Maxwell's life.

© 2014 Michael T. Sanford


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    • Hezekiah profile image


      4 years ago from Japan

      I had a bad credit score in the UK. Immigrated ti Japan now I am clean here, even bought a house.

    • Cheeky Kid profile image

      Cheeky Kid 

      4 years ago from Milky Way

      I sure didn't know that. But yeah, I still haven't applied for a credit card in my life yet.


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