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To decide whether it's time to apply for another credit card, the most important consideration is your credit score.
If your score has improved since you got your last card, you may qualify for a card with rewards and benefits you couldn't have before. Or if you've only been an authorized user on another person's card, you might explore getting your own.
Applying for another credit card could also be worth it if your credit file is "thin" or an additional card could improve your credit utilization ratio—the credit you're using relative to your overall credit limit. Here's how to know when it's time to apply, and when it could be better to wait.
When It Can Be a Good Idea to Get Another Credit Card
Consider seeking a new credit card when you're in one of the following situations:
- Your credit score has improved: If you already have a credit card and your credit score has increased since you first got it, you might now be eligible for a new credit card with premium benefits. That can be the case if you have a student credit card from your college days, or a secured credit card you used to build credit.
You may want to apply for a card that offers a higher cash back rewards rate or the opportunity to rack up points for travel, if that's more in line with your current lifestyle. These cards also typically require good or excellent credit, which shouldn't be a problem if you've been practicing good credit habits. - You'd be able to take advantage of promotions: Some cards offer a 0% promotional annual percentage rate (APR) for a year or more. It can be a smart financial move to use this period to make interest-free purchases. Other cards offer cash bonuses if you spend over a certain threshold in the first few months of having the card. If you're planning a wedding or home renovation, for instance, you're likely hit a credit card's minimum spending requirement. Getting a card with a high sign-up bonus could mean, in effect, a discount on your purchases.
- You have a history of managing credit responsibly: Honestly assess whether you'll be able to juggle your new credit card along with what you already have. Prioritize making payments on time every month and keeping your balance low. If you're gunning for a sign-up bonus, make a plan to pay off the balance as soon as possible. Access to more credit shouldn't mean more spending beyond what you can afford to pay off.
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When You Might Want to Wait to Apply for a New Credit Card
There are circumstances in which you should wait to apply for a new credit card:
- You've recently applied for a credit card: When you apply for credit, a lender generally will request a copy of your credit report—this is called a hard inquiry. Too many hard inquiries in a brief time is a red flag for lenders, who may interpret them as a sign that you're not a responsible manager of credit.
Some card issuers even have their own rules about how long you must wait before applying for a new card with the same company. Chase, for instance, has an informal policy called the 5/24 rule that restricts customers from opening more than five Chase credit card accounts in a 24-month period. - You're planning to apply for a loan or mortgage: Avoid applying for new credit if you'll also be seeking other forms of credit, like a home loan, in the near future.
While one hard inquiry's effect on your credit is minimal, a slight point drop could prevent you from making it into a lender's most competitive interest rate tier if you're already on the edge. A new line of credit will also lower the average age of your accounts, and lenders like to see long credit histories. Experts recommend you avoid seeking new lines of credit for one year before applying for a mortgage. - You're struggling to afford your current credit card bills: It's also wise to wait to apply for a new card if you can't pay off the cards you have, or if you feel you'll be tempted to overspend with a bigger credit line. Wait until you're confident your income and spending habits can support the greater access to credit a new card would bring.
What Happens When You Apply for a Credit Card
New credit inquiries account for 10% of your credit score and stay on your credit report for two years.
While hard inquiries have a negative impact on your score, the effect you'll see depends on the number of accounts you have and the length of your credit history. If you have a limited credit file, you'll likely see a bigger impact. One hard inquiry results in a drop of less than five points for the typical consumer, according to FICO.
If your application is denied, lenders must tell you why and provide information on how to access your free credit report. It's possible the lender determined you have too much debt compared to your current credit limit, that you don't have a long enough credit history, or that you have too many missed or late payments.
Contact the lender if any of your circumstances have changed since you applied for the card—perhaps you paid off another balance or increased your income, for instance. Request that the lender reconsider your application. If the answer is still no, refer to your credit report and aim to address the negative information that may have contributed to your rejection.
Know When the Time Is Right
A new credit card could net you more premium benefits, like higher cash-back rates, primary rental car insurance or no foreign transaction fees. It could also mean a lower APR which will save you money if you carry a balance month to month. But make sure you're ready for the responsibility of another card.
If you're not sure you'll qualify, or you applied and got rejected at first, view your free credit score. Then you can take action on any factors keeping you from accessing a potentially worthwhile new card.