So today IRL I had a friend ask me, “How long should I wait before applying for a new credit card?” This friend, who I’ll call Nicole, had been poking around my blog but couldn’t find if I had written about it anywhere. While I discussed the different ways applying for new credit cards affects your credit score way back when this blog began, I never explicitly discussed how long to wait between credit card applications. I thought it’d be helpful to address this really quickly.
Of course, the answer, as always, is it depends. And I’m generally hesitant to hand out concrete advice these days, on the blog at least. We all have our unique situations. Still, I’ve had a few reader questions lately that I’d like to address, and I’ll start with this one.
For these reader questions, my aim is to provide a framework for people to make their decisions. While I know my friend’s particular situation and what I’d advise her, that doesn’t mean it’s the same thing I’d advise another reader. But I think the framework we approach questions generally remains consistent.
So, what should you consider when deciding how long to wait between credit card applications? TL;DR at the bottom of the post if you’re lazy, but if you’re a beginner make sure you understand what you’re getting yourself into.
Can you handle paying your credit cards in full?
Since this post suits beginners more, let me start with the biggest reminder. Credit cards and the benefits you can earn are wonderful, but you must have both the means and the discipline to pay your cards off in full. Otherwise, the banks are making money off of you and you are putting yourself in a negative financial situation.
There are, of course, exceptions for advanced players – but that’s 400-level stuff. Be responsible, pay your credit card bills on time and in full, or perhaps consider another strategy.
Factors that affect your credit score
So I mostly covered it in that old post, but let’s quickly look at what affects your credit score. It’s important to understand what a credit score is and how it’s used.
Simply put, the banks are trying to figure out whether you will pay them back their money. Obviously, if they extend you credit and you never pay it back, they lose money. Your credit score places a numerical value on how “trustworthy” you can be. With that in mind, a quick recap of what affects your credit score.
Obviously, if you pay your bills on time, you will look more credit-worthy to the banks. And like I said above, pay your credit card bills on time and in full.
This is mostly a fancy word for the amount owed. Basically, if you use a lot of the credit offered to you, then banks find you less credit-worthy. “Why does she need all that extra money?”, they ask. So if you have a lot of credit available to you but you don’t use a lot of it, you seem more credit-worthy to the bank.
Average Age of Accounts
If banks have been extending you credit for a long time, you look more credit-worthy.
New Credit Inquiries
If you keep asking the banks for more credit, that naturally hurts your credit score.
What causes banks to refuse to extend credit to someone
So I said I’d give you a framework for making your decision. Taking into account the factors that affect your credit score above, you can sort of figure out why banks would reject you for a credit card.
If you use up a lot of the credit extended to you, apply for cards all the time, and miss payments, obviously you’ll look bad to banks and they won’t want to give you credit cards.
However, if you’re responsible and pay your cards on time and don’t use up all your credit, you will look different to a bank even if you apply for cards a lot. Does applying for a lot of cards look great? Probably not, but overall you look like a net gain for the banks and they will be more likely to approve you for a credit card.
Your credit inquiries (each time you apply for credit) hurt your score the most in the first three months, and then the negative effect decreases.
So a general rule of thumb, which led to the old app-o-rama strategy, is don’t apply for credit cards more frequently than every three months. But overall, it’s okay to apply for cards every three months because every card you approve for makes your credit utilization look better, assuming you don’t increase your spending. You get more credit extended to you, spend the same amount of money, so your amount of credit used goes down.
And, of course, there are lovely banks like Chase with rules prohibiting you from (generally) getting approved for new cards if you’ve opened too many in the past. Google Chase 5/24 if you don’t know what I’m talking about.
Overall, make sure you have a good understanding of where you stand before you apply for new credit cards. Sites like Credit Sesame and Credit Karma will give you an estimation of your credit score, too.
How often do you apply for credit cards overall?
This, ultimately, is what I asked my friend and the most relevant to her situation. If you consider yourself a travel hacker and apply for cards all the time, you should follow the general rule of thumb and wait 90 days for new cards.
But if you’re just starting out, or have a lot of expenses coming up, it’s not the worst thing in the world to apply for, say, two cards within a month of each other. It will definitely hurt your score in the short term but on time payments and your credit utilization should balance that out in the long term.
Which is why I say everything depends. Personally, I don’t adhere to a strict 90 days anymore, though I try to keep everything spaced out like that as a general guideline.
Some questions to ask yourself
As promised, here’s the TL;DR version. A framework, if you will, of what to ask yourself/think about if you are trying to figure out how often you should be applying for new cards.
- Are you paying your credit cards off in full every month?
- Assess your payment history, credit utilization, average age of accounts, and recent credit inquiries.
- How many lines of credit have you applied for in the last 90 days?
- Do you have any large credit needs (e.g., mortgage), coming up in the next 90 days?
While the general answer to how often to apply for new lines of credit is 90 days, a good understanding of yourself and your habits in relation to the above questions should help you determine situations when you might not want to wait the full 90.
Again, I can’t reiterate this enough. You have to figure out what works for your current financial situation. But I’d definitely advise against messing around if you’re not paying your credit cards off in full. Personally, I don’t apply for cards every 90 days anymore. I just wait until I see sign up bonuses I like and then pull the trigger. That means sometimes I’ll go six months with no new cards. Other times, I apply for 3 cards in the span of 12 days.
If you’re a beginner, start out slow and find out what works for you. Hopefully this gives you a general idea of what to consider in terms of time between new cards. Remember, sign up for cards with your travel goals in mind. Happy travels!