There comes a time when you have rebuilt your credit to the point that you think it is finally safe to apply for a new credit card. The credit card company runs a hard inquiry on your account when you do this. You already know this will appear in your credit report, but how much will it affect your overall rating? What happens if you are turned down and want to apply for another credit card?
There are two different types of inquiries: hard and soft. Hard inquiries will generally stay on your credit report for two years. These are inquiries made by credit card companies, banks, or other creditors checking your credit history to establish your eligibility for a credit card or loan.
Having a hard inquiry on occasion will not affect your credit rating very much. However, you should try to limit it to no more than three hard inquiries on the report at any given time.
Soft and Single Enquiries
Soft inquiries do not affect your credit rating at all. This type of inquiry is done when you check your credit report. This can be done at any time with a paid or monthly service. In addition, if you are turned down for credit, you can use the declination letter to obtain a free report to show you why the application was denied.
As stated earlier, a single inquiry will do very little to your overall credit rating. In most cases, each investigation will deduct about five points from the overall score. The danger here is in having multiple inquiries hit the account all at the same time. When this happens, red flags start to go off with creditors. There are several reasons this could occur.
The obvious reason is that the initial application was turned down, and you are simply trying to apply for another card, hoping to be approved. This, in and of itself, is not necessarily a bad thing. A problem arises, or the red flags start to go off, when your debt-to-credit ratio is high and rapid-fire applications are being filled out. This is generally a sign that a person is financially in trouble and is applying for more credit to bail themselves out.
If your credit is already shaky and you have a high debt-to-credit ratio, your application will likely not be approved. Instead of risking the hit to your credit, try waiting for a pre-approved offer. The inquiry will still show up on your report, but you have the luxury of knowing you are applying for a card that will be approved.
With solid credit, you have nothing to worry about if you are applying for a new credit card or even two simultaneously. Your report will take a small hit, but nothing will scare away a potential creditor. However, before applying for any type of new credit, it is always wise to pull your own credit report to ensure nothing harmful is on it and that the report is current with all activity.