2-Minute Money Manager: Will Signing Up for Lots of Credit Cards Hurt My Credit?

Woman w Credit Cards
Photo by Brastock / Shutterstock.com

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about credit cards and credit scores; specifically, whether having lots of credit cards will damage your score.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information, check out “The 6 Best Credit Cards This Spring” and “4 Reasons You Should Switch Credit Cards.” You can also go to the search at the top of this page, put in the words “credit cards” and find plenty of information on just about everything related to this topic.

And if you need anything from a better credit card to a mortgage, be sure and visit our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Ramsey:

“I desire to add several credit cards for increased bonus air miles. My wife fears that those extra credit cards will hurt our credit score. What is the truth?”

This question isn’t a straightforward as it seems, because adding new credit can affect you in both the short and long term.

Short term

In the very short term, opening a new account will cost you a couple of points on your credit score. Why? Because getting approved for a credit card requires a “hard pull” of your credit profile by the card issuer. This happens every time you apply for a loan or credit card, and is the reason you might see your credit score drop a few points after a credit card or loan approval.

A soft pull, on the other hand, has no effect — positive or negative — on your credit score. Examples of soft pulls would be when you check your own credit, or when a credit card company checks your credit before offering you plastic.

Generally, the drop in your score from a hard pull is marginal. That said, it’s worth noting that a hard pull of your profile remains on your credit report for up to two years before falling off, although it shouldn’t affect your score after six months or so.

Bottom line? In the short term, Ramsey’s wife is right to be at least a bit concerned. Applying for credit cards can negatively affect your score. Other things to consider:

  • Be selective. Since pulling your credit profile could cost you some credit score points, try to only apply for cards you have a good chance of qualifying for. There is no point in losing points for cards you weren’t going to get anyway.
  • We’re not all alike. Those with high credit scores and solid credit histories will lose fewer points than those with lower scores and spotty histories.
  • About to borrow big? Be careful. If you’re going to be applying for an important loan within the next six months — think car loan or mortgage — don’t take a chance on losing points by applying for additional credit now. Lost points on a credit score could cost you tens of thousands on a mortgage. On the other hand, if a big loan request isn’t in your future, it’s probably not a big deal.

Long term

The long-term effects of opening a new credit card account can be positive, assuming you make on-time payments each month and keep your balance low. In fact, opening a new credit card account improves your score in more ways than one:

1. Improves your payment history. According to FICO, more than one-third of your credit score is made up of your payment history. A pristine payment history means zero late or missed payments. The longer you go without missing a payment, the better your credit score will be. Adding a new card and making on-time payments each month will enhance your payment history, and thus your score.

2. Extends your available credit line. FICO has said that the second-most-important factor when determining your credit score is your credit utilization ratio. This is the amount you owe relative to your total available credit line.

When you add a card to your credit profile, you’re extending your total available credit line and thus lowering that all-important credit utilization ratio. Ideally, you want to keep this ratio as low as possible: 10% to 30%. If you keep it at 10%, for example, that means if you have a total credit line of $1,000, you should never owe more than $100. This is another reason why it’s extremely important to keep your credit card balance low.

3. Diversifies your credit profile. Finally, opening a new credit card account diversifies your profile, especially if you haven’t had a credit card before. Having different types of credit — credit cards, home or car loans — is another factor that can raise your credit score.

In conclusion

While you might see an initial drop in your credit score upon approval of a new card, the long-term positives can outweigh the short-term negatives associated with opening a credit card account, providing you won’t need to apply for a mortgage or car loan for six months or more.

If Ramsey has great credit and no plans to borrow big anytime soon, why not apply for cards that offer big sign-up bonuses?

In fact, I recently did that myself. A couple of months ago, I signed up for a new card that, after spending a few thousand dollars within the first few months, paid 100,000 reward points. That’s enough for a week’s worth of hotel stays.

As long as I pay the card off every month — and I most definitely do — what’s not to like?

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
5 Tax Breaks That Retirees Often Overlook
5 Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

26 Work-From-Home Jobs That Pay $100,000
26 Work-From-Home Jobs That Pay $100,000

These lucrative gigs let you work in your slippers.

8 Secrets of an Expert Thrift Store Shopper
8 Secrets of an Expert Thrift Store Shopper

Here’s how a veteran thrift shopper scores the best deals — and turns a profit from them.

Should You Hire a Service to Negotiate Your Cable and Other Bills?
Should You Hire a Service to Negotiate Your Cable and Other Bills?

Services like BillCutterz and BillFixers will negotiate your cable, internet, phone and other monthly bills in exchange for a share of the savings. I tried it: Here’s what happened.

10 U.S. Jobs That Are Disappearing Fastest
10 U.S. Jobs That Are Disappearing Fastest

Think twice before pursuing these shrinking occupations.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Social Security Checks Likely to Grow This Much in 2021
Social Security Checks Likely to Grow This Much in 2021

The federal government recently released a key statistic that gives clear insight into what next year’s COLA will be.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

10 Deep Discounts Available on Amazon This Friday
10 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.