A man on a tablet researching if applying for a credit card would hurt his credit.

You might have been warned about applying for too many credit cards at once, but does applying for a credit card hurt your credit? We take a closer look at how credit applications actually affect your credit score.

Card Smarts: Credit Card Applications and Your Credit Score

Your credit or FICO score is a measure of your creditworthiness assigned by credit bureaus that track how you spend, borrow, and repay money. While your credit score can be affected by many factors, making too many credit card applications is widely believed to lower your creditworthiness and, consequently, your ability to qualify for cards or other forms of credit.

Let’s consider how credit applications work and how they actually affect your credit score.

How Do Credit Applications Work?

Credit bureaus like Experian, TransUnion, and Equifax maintain detailed records of how much credit you have access to, how much you have actually borrowed in the form of loans, lines of credit, mortgages, or credit card balances, and how reliably you pay down this debt.

Whenever this record is accessed, an inquiry or “pull” is recorded on your report. There are two types of credit inquiries: “soft pulls” and “hard pulls.”

Soft Pulls

A soft pull is generated when you check your own credit union, either directly or through a credit monitoring service. Soft pulls are also generated by lenders reviewing existing credit accounts and companies looking to market promotional credit offers to you.

Soft pulls are recorded on your credit report for two years but are not used to calculate FICO or other credit scores.

Hard Pulls

A hard pull on your credit report is triggered when you make an application for credit in the form of a credit card, line of credit, or loan. These hard inquiries are included in calculations of your credit score and remain on your credit record for two years.

In the case of both hard and soft pulls, the credit bureau has no direct way of knowing if your application was successful or not.

How Does a Hard Pull Affect Your Credit?

Applying for a credit card will generate a hard pull by the issuer as part of their approval process and will temporarily lower your score. How much your actual score drops depends on:

  • How much recent credit activity there has been on your record
  • How good your overall credit history is

While hard pull inquiries are reflected on your credit record for two years, credit bureaus like Experian say the effect on your credit score is usually very limited. Within 1-2 months, the increased credit risk represented by an inquiry is either:

  •     Replaced by the billing cycle risk of a new credit account, or
  •     Excluded from FICO score calculations entirely

When Can Hard Pull Inquiries Be a Problem?

While credit inquiries do not directly affect your chances of being approved, they can become a factor if your credit is already marginal or unstable. If your score is already close to a lender’s borderline for approving credit, then additional inquiries will likely prompt prospective lenders to dig deeper into your credit report and review your application more carefully.     

Be Smart About Timing

This is why it is important to be smart about timing your applications for credit cards (or other sources of credit) especially if you are just starting out or are rebuilding your credit. Here, the cumulative effect of several hard pulls on your credit record could have a larger effect on your credit score.

In cases like this, it pays to be cautious about how hard pull inquiries might affect your credit score. You should, for example:

  •     Avoid “shopping around” for credit with multiple hard pulls over a short period
  •     If you are planning to make a major purchase on credit, delay credit inquiries 
  •     Be cautious about being talked into “on the spot” credit approvals by lenders.

Play Your Cards Right With Bowater

While it always pays to be cautious, owning, using, and managing a credit card helps establish the creditworthiness that will allow you to build the future you are dreaming of. Whether you are taking the first steps on your financial journey, or you’re looking for a better deal on your existing banking cards, Bowater Credit Union has the debit and credit cards you need.

Bowater offers members access to card products including:

Our feature-packed Visa credit cards include:

  • No annual fees
  • Competitive rates
  • Balance transfers
  • 25-day grace period on payments
  • Visa Purchase Alerts
  • Free eZCard financial management service    

What’s more, all Bowater cards come with our local community focus, trademark-friendly service, and easy three-step application process. We’ll work with you to help you find the bank cards and other financial tools you need to make the most of today and plan for a better future.

Click below to learn more about Bowater Credit Union’s debit and credit offerings.