How Applying For A Credit Card Affects Your Credit Rating

People applying for credit cards should make a point of understanding how credit applications affect their credit rating. Every time a person applies for a credit card, their credit card rating is affected. This is because a person’s FICO score (credit score) is checked by creditors with every credit application made. This inquiry itself can deduct points from a person’s credit score. The more often a person applies for credit, the more their credit score is deducted.

A person’s FICO score can be affected by two different types of inquiries: hard pull and soft pull inquiries. A soft pull is an involuntary inquiry that can occur in a number of ways. For example, when a person’s credit rating is pulled by an existing creditor, creditors offering pre-approved credit, a potential employer, or by oneself, this constitutes a soft pull. A hard pull is a voluntary inquiry that occurs when a person is applying for credit. It is a hard pull and not a soft pull that can affect a person’s credit score, as it deducts 3-5 points. A credit score that is hurt by hard pulls and other types of negative credit history can affect one’s credit application. Moreover, whether a person is approved or denied credit is not of concern; what matters is the type of inquiry that is made.

Why do credit applications affect one’s credit card rating? Applying for credit can indicate that a person is in need of money. The more often a person applies for credit, the more desperate they can appear to get money, which in turn makes it look like they are in a bad financial situation. The more often a person applies for a credit card, the worse their credit card rating becomes, and the more cautious creditors become when considering credit applications. This is especially true if multiple inquiries are made over a relatively short period of time. Credit inquiries constitute 10% of a person’s credit score, which is substantial enough to not overlook.

People applying for credit cards should keep applications to a minimum as they negatively affect credit card ratings. This can make creditors hesitant to approve credit applications. The degree to which credit applications can affect a person’s score also depends on their score prior to their multiple credit card applications. For example, a person with a strong credit history and high credit rating will not be as affected by multiple credit applications as would a person with a poor credit history. Therefore, keeping track of one’s own credit history and considering how credit applications can affect credit scores is very important for having credit applications approved. Consider all of this before applying for your next card.