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Everyone knows that in order to gain a good credit score, you must get a credit card. To gradually build your score and reputation, you must get a credit card and use it wisely. This means spending with it responsibly and paying off your bills on time and keeping your balances low. However, at the same time, having too many credit cards can negatively impact your credit score. If you are like many people, you probably have the question in mind as to why this happens. To ensure that your credit score is good and stays that way, you have to be smart about applying for credit. Here are a few steps to enlighten you as to why having multiple credit cards can hurt your credit score.

Credit Inquiries Can Affect Your Score

A credit inquiry is a review of your credit profile. However, when you apply for a new credit card, there are hard inquiries made. These are the ones that can affect your credit score. Hard inquiries are inquiries on your credit profile that are made any time you apply for a new credit card or a loan. Part of your credit score ends up being determined by any new inquiry. In addition, hard inquiries stay on your credit report for as long as two years.

Each hard inquiry you get can cause your credit score to dip by a few points. Many people can regain those precious points within six or so months after applying for a new credit card. At the same time, if your credit score was poor before your application, the points you regain can really add up.

Applying for Too Many Credit Cards Can Mean Potential Financial Risk

Any credit card application or application for a loan will end up on your credit report. Many can cause your credit score to decrease, but one thing to note is that not all hard inquiries are the same. For example, you may apply for multiple loans for a home mortgage if you aren’t sure about which lender will provide you with the best interest rate. In order to find out which one would offer the best rate, you would have to apply for a loan at several different banks within a week.

Although this should technically cause a considerable dip in your credit score, it would really only count as a single inquiry.

However, when it comes to credit card applications, it’s a different story. Multiple inquiries for new cards within a short period of time will certainly cause a notable decrease in your credit score. This is because applying for several cards in a short amount of time makes you seen as a greater financial risk. It implies that you are a riskier borrower than a person who applies less frequently and for fewer credit cards.

What to Keep in Mind Regarding Your Credit Score

It’s important to remember that your credit score is essentially an indicator of how responsible you will be with money you borrow. If you exhibit irresponsible behavior, in other words, and that includes applying for multiple cards at once, it will reflect in your credit score when it drops. If you have already fallen into the trap of applying for several cards at once, don’t worry – your credit score will increase over time.

The best thing you can do after such a scenario is to wait it out. Make sure you pay your debt in a timely manner and keep your balances low. Your credit score will gradually improve and it will be a good lesson learned.