Here's What Happens to Your Credit Score When You Apply for Too Many Cards

Spoiler: Applying for too many credit cards can have a major impact on your credit score. But there is a way to smooth out the impact. Let's take a look at why applying for too many cards can hurt your score and what you can do to avoid damaging it. 

Applying for too many cards at once will hurt your credit score 

Every time you apply for a new credit card, you authorize the credit card issuer to run a hard iniquity on your credit report. Hard inquiries can cause your credit score to drop by five to 10 points. What's more, the hard inquiry will stay on your report for two years. Depending on how many hard inquiries you have, this could cause a significant drop to your credit score. 

To be fair, hard inquiries make up the smallest portion of your credit score pie. For instance, your FICO® Score -- the most widely used credit score model among lenders -- has the following five components: 

• Payment history (35%) 
• Amounts owed (30%) 
• Length of credit history (15%) 
• Credit mix (10%)  
• New credit (10%)

A hard inquiry would fall under "new credit." Since it is a low percentage, opening one or two cards typically won't sink your score. But opening a slew of cards at once could lead it to drop five to 10 points each time, which is a much heavier chunk. What's more, applying for numerous cards in a short period is often perceived as a sign of financial distress. This could alarm credit score analytics companies and cause more damage. 

In addition to putting hard inquiries on your credit report, opening new credit cards could impact your score in two other areas: your length of credit history (15%) and amounts owed (30%). 

New credit cards will make your average credit history seem younger. In this case, being younger is not positive (is it ever?) and could ding a few more points off your credit score. 

At the same time, new credit cards will increase your total credit. This could be positive. More available credit could improve your credit utilization ratio. And in the FICO scoring model, it makes up a whopping 30%. Of course, this assumes you're not going to max out each card, or at least charge a significant amount. Keep the balances low and more credit cards could soften some of the impact done by hard inquiries. 

How to apply for numerous credit cards without hurting your credit score 

No matter what, applying for a new credit card will cause a slight ding to your credit score. But if you want to avoid absolutely crushing it, the best thing to do is space out your applications. Generally speaking, it's wise to wait six months after applying for a credit card to send in a new application for another. 

Why six months? Well, in my experience, it's best never to exceed four hard inquiries on your credit report at a time (five is the maximum). Remember that hard inquiries stay on your report for two years. If you apply for one new credit card in six month intervals, you should never have more than four hard inquiries at a time. 

Sometimes, even four hard inquiries is too many. For instance, recently I applied for an Amex card and was denied -- even though I had three hard inquiries and an 811 credit score.

All in all, if you want to apply for numerous credit cards (like more than three), prepare yourself for a hard impact on your score. It's only temporary, of course, but it could affect your ability to use your credit to get cheaper car insurance and apply for new loans. Try to use the credit line that you have, and if you need to borrow more money, apply for something that has higher borrowing limits, like a personal loan.