If you’re in the market for a new credit card or keen on a lucrative welcome offer, you may find yourself asking how long you should wait before applying for new credit cards. The straightforward answer is typically six months, but the reality is a bit more nuanced.
The duration between credit card applications largely hinges on your personal objectives, credit standing, and the specific policies of lenders. Continue reading to uncover more about the appropriate waiting periods between credit card applications.
Appropriate Waiting Periods Between Credit Card Applications
Based on your credit score, many professionals advise waiting three to six months before applying for any new credit card. This waiting period allows time for your credit score to recover from the hard inquiry generated by each application.
Although this is generally sound advice, it’s important to note that different credit card issuers may have specific guidelines that could influence your timing.
Same-Day Applications
Interestingly, submitting applications for multiple credit cards on the same day can be advantageous. In these cases, several applications usually generate only a single hard inquiry on your credit report.
For instance, if you apply for both the Scotiabank Passport Visa Infinite Card and the Scotiabank Gold American Express on the same day, it’s likely that the credit check will only record one inquiry.
90-Day Rule
Institutions like RBC and American Express follow a 90-day rule. This implies that once you apply for one of their cards, you cannot secure another from the same issuer within a span of 90 days. It’s worth noting that this rule applies separately to each financial organization. Therefore, you could feasibly acquire cards from RBC and Amex in close succession.
Business credit cards are an exception to this guideline, allowing you to apply for both personal and business cards within the same 90-day timeframe.
Six to Twelve Months
As previously mentioned, experts commonly suggest waiting three to six months between applications to minimize hard inquiries impacting your score. Credit agencies like Equifax and TransUnion generally frown upon an excessive number of inquiries as it may be seen as a warning sign that could negatively influence your credit rating.
12-Month Rule
The 12-month rule primarily concerns individuals aiming to benefit from sign-up bonuses. Certain issuers, such as TD, explicitly stipulate that applicants can only receive the welcome incentive once during a twelve-month cycle. This is an important factor to consider if you plan to optimize your rewards; some lenders may even have a 24-month stipulation instead of a 12-month one.
Once-in-a-Lifetime Bonuses
You might be surprised to learn that certain bonuses are designated as one-time offers. For example, the fine print on some American Express cards indicates that the bonus is obtainable only once per customer. The enforcement of this condition may vary.
Impact of Applying for Multiple Credit Cards on Your Score
The answer is affirmative. Each time you submit a credit application, your credit score can drop by around 10 points. A high number of recent inquiries may impact more significant applications, such as for a mortgage, as lenders might question why you are seeking increased credit access.
It’s essential to recognize that applications for different types of credit, such as auto loans, will also influence your credit score.
However, if you have a robust credit score of 800 or above, which is categorized as excellent, a few recent applications might not pose much of an issue, even if they cause your score to decline temporarily.
Benefits of Having Multiple Credit Cards
Understanding how long to wait between credit card applications leads to the natural next question of why one would want multiple cards. Depending on your personal circumstances, having two, three, or even more cards could be beneficial.
Diversification
Owning more than one credit card is commonplace. There may be instances where one card is not accepted by a merchant; for example, Costco only processes Mastercard transactions. Additionally, card issues can arise unpredictably, so having a backup ensures consistent access to credit.
Enhancing Your Credit Utilization Ratio
Your credit utilization ratio indicates how much credit you use compared to your total available credit. For instance, if your limit is $5,000 and you consistently charge $2,500, your ratio stands at 50%, which is relatively high. However, if you’re approved for an additional credit card with a $5,000 limit, your total available credit increases to $10,000, adjusting your utilization ratio to a more favorable 25%.
Capitalizing on Welcome Bonuses
Many of the top travel rewards credit cards in Canada provide substantial welcome bonuses. These offers present a swift way to accumulate reward points, which can ultimately lead to free or discounted travel once you reach the necessary point threshold. Of course, remember to adhere to the aforementioned guidelines.
When to Refrain from Applying for Additional Credit Cards
While you are now aware of how long to wait between applications, it does not mean you should apply the moment you are eligible. In certain situations, it may be wise to hold off on applying for new cards.
- Upcoming Major Loan –Many lenders prefer not to see new credit accounts opened just before a loan application, which might raise concerns regarding the amount of credit you seek.
- Risk of Overspending –Research indicates that access to extra credit often leads to increased spending. More available credit can result in unwarranted debt.
- Potential Bans –Repeated credit applications can be viewed as suspicious by some banks and loyalty programs, which could result in a ban to prevent misuse.
In general, if your credit score is strong, applying for a new credit card every six to twelve months should not be detrimental. It’s even possible to apply as soon as three months apart, provided you have a valid reason for the application. It’s advisable not to apply merely for enticing sign-up offers without a concrete intent.