Can Too Many Credit Cards Hurt Your Credit Score?

Author: Dan Rafter / Source: Wise Bread

You’re checking out at your favorite department store when the cashier asks if you’d like to apply for the store’s credit card. Doing so will save you 10 percent on your purchase. Should you fill out the application? Or will having too many credit cards in your wallet ding your three-digit FICO credit score?

According to myFICO.com, there is no “golden number” of credit cards that will hurt or help your credit score. What matters most is how you use those cards — namely, paying your bills on time. Still, there are a few important things to remember when you have multiple credit cards.

Inquiries ding your credit score

Whenever you apply for a new credit card, your FICO score will fall slightly. The creditor behind the plastic will order a copy of your credit report from one of the three national credit bureaus: Experian, Equifax, or TransUnion. This inquiry will then show up on your credit reports.

An inquiry will temporarily drop your credit score because whenever you apply for new credit, there is a risk that you will borrow more money than you can afford to pay back. How much your score will drop varies, but myFICO says that for most people, a single inquiry will result in a drop of five points or less.

The drop in your score might be steeper, however, if you apply for several credit cards in a short period of time. There’s a statistical reason for this: myFICO says that people who have six or more hard inquiries on their credit reports — inquiries made by a lender with whom you’ve applied for credit — are up to eight times more likely to declare bankruptcy than consumers who have no inquiries.

Hard inquiries remain on your credit reports for 24 months before falling off.

The smart move is to apply for new credit if you need it and plan to use it. Don’t apply for new credit cards just to get a store discount you’ll use a few times.