Credit scores are used by lenders to determine if you are a trustworthy borrower. The score is based on your payment history, the amount of money you owe, the length of your credit history, the types of credit that you use and your applications for new credit. Applying for credit cards will usually show up as an application for new credit on your credit score, which can negatively impact your credit rating.
New Credit Applications Score
10% of your credit score is based on your applications for new credit. If you apply for a number of new lines of credit, you appear desperate to creditors, and your credit score suffers. This section takes into account if you are applying for a home or auto loan and make multiple inquiries because of that, but does not allow for multiple credit card inquiries without docking your score.
What Is an Inquiry?
An inquiry is any time a creditor orders your credit score with your permission. For example, if you apply for a credit card, the credit card company orders your credit score to make sure you are a worthwhile credit risk.
Exceptions to Inquiries
There are some exceptions that allow people to look at a credit score without it counting as an inquiry, such as when you look at your own score, an employer requests your score for nonfinancial reasons, periodic monitoring by a credit card company and pre-screening by credit card companies for special offers.
Effects of Inquiries
Applying for new credit cards is much more likely to negatively impact your score if you have a short credit history or have had defaulted in the past.
Benefits of Credit Card Accounts
If you have an old credit card account that you no longer use, don't close it. It adds to your length of credit history and increases your available credit so you are using less than your maximum amount of credit, even if another one of your cards is close to the credit limit.
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