Credit card companies submit thousands of pre-approved offers to unsuspecting customers. Many offers read, “Pay no interest until 2007″ or even worse “0% introductory period,” which is almost always followed by an asterisk. What are these credit lenders trying to do? Simply screw you.
They accomplish this feat in two very separate ways.
1. They want your business, obviously. Credit companies want consumers to open accounts with them and obtain credit. Every time you use your credit card, the company backs the purchase and simply charges you interest on your balance. It’s simple enough as long as you stay away from ATMs and excessive balance transfers. Too many cash withdrawals will send your APR into the heavens. Excessive balance transfers carry staggering fees that take away from the whole point of a transfer: to capture a lower interest rate.
2. This point is very important, and I had to learn this one the hard way. About two years ago, I opened several credit card accounts with Bank of America and Capital one. I hadn’t used more than one credit card for some time and decided to enhance my spending power. I filled out each application allowing the two companies to submit credit inquiries on my account. Soon enough, my wallet sported four credit cards - most with fairly small balances. And then the sad part came. It was time to renew my car insurance, and I opened the statement with no hesitation. WHOA! My premium shot way up. We’re talking nearly 30% increase. I phoned my insurance company and asked, “What Gives.” The phone representative clearly stated my FICO score was lower than before, so my insurance premium was raised.
To keep a longer story short, limit the amount of credit cards you hold because
every time you request an additional card, your credit lender submits an inquiry that causes your FICO Score to drop.
Drops in FICO Score raises the interest rates of credit cards, loans, mortgages, insurance premiums, and even some employers screen your score. I will remember (and I hope you too as well) to limit my number of credit cards to keep my score reasonable.
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Ah your score does drop for each inquiry and as the number of inquires rises the drop is lessened a bit. There migh be a threshold such as first two inquiries may drop 6 pts each then the next 2-3 inquiries drop it 4 pts each etc. Point being it does not matter one bit how many cards you have in your wallet when it comes to inquiries dropping your score. Fico takes into account if you are seeking NEW credit so shopping for 4 credit cards probably hurt your scores for about 6 to 12 months but they should recover and ironically if you sometimes carry a balance may have improved your scores.
Fico uses utilization as another way to calculate creditworthiness. So if you are using lets say 3% of your available revolving credit you are managing well. Not hard to do if you have 4 or more high limit cards and manage your debt wisely. However for those with only one lonely card with less than lets say 1000 dollars limit its pretty easy to run your utilization of available credit to 30 50 or even more than 80% for a month or more. ( car breaks down charge 2 plane tickets etc) so even if managing your debt wisely you pay off that debt promptly while the balance is carried your fico will plummet. So having some credit to cushion your utiliaztion is a good thing. If that person with 1 1000dollar limit card applied for 4 more cards and received 4000 more available credit then that 500dollar plane ticket wont bring him anywhere near 50% utilization thus preserving his hard earned high FICO score.
Moral of story is you can either 1. apply instant approval online to many cards at once look up AOR or app-o-rama but be very very cautious and do your research if you are applying for many many cards at once a mini ap o rama of less than 10 cards wont hurt your score for more than 12 months but be sure to not need a new mortgage in that time period for instance. Use instant apps as they appear on your credit report quickly using the instant apps may get around the multiple inquiries bringing your score down if you apply all of the apps nearly simultaneously. There is a very small lag for some to appear. Not to worry if says 7 to 10 days for response after app submitted you might still get card anyways. if not then call their cust line and ask for a re-review of app sometimes they will aprrove then. After an apporama must cool it on inquiries.
2) other way to add a card or two at a time spaced about 6 months apart. buy your fico scores look for a card you want do a search see if you can qulify before applying dont rely on those preapproved offers look up on internet card and fico people have when they are approved. ( other factors to consider are do you have banruptcy many late pays, public record like lein or judgement not only the score can cause denial.) So being selective space out apps about every 6 months or more should only hurt your score after the app for about 6 pts or so. knowing your score and the likelihood of acceptance will increase chance of not wasting an inquiry on a denied card. Good luck increasing your available credit and recuing your utilization to INCREASE your score.
Actually having the four cards if you did not max them out or if you sometimes carry a balance will increase your score.