Applying for the wrong credit cards can just make bad credit worse

Suffer from poor credit? You’ll want to be careful about which credit cards you apply for and when. That’s because applying for credit can temporarily lower your credit score, making it more difficult to qualify for other financing. Plus, it’s better to avoid certain credit cards entirely, especially if they carry exorbitantly high interest rates and fees.

Take the time to learn the answers to important questions, including which credit card is best for you, what happens if you applied for the wrong credit card, and what you should do after your credit application is denied.

What happens after you apply for a credit card?

Credit cards often make transactions easier, safer and more convenient. The right card can also yield generous rewards, and using a credit card responsibly can improve your credit. This is a smart move if you have poor credit — which FICO defines as a credit score below 580 on its popular credit scoring scale that runs from 300 to 850.

But it’s important to understand that applying for a credit card can temporarily lower your credit score.

“A credit card application will typically trigger a hard inquiry — a notation that you’ve applied for credit — on your credit reports. This isn’t a big deal in isolation, as it may only be five or 10 points off your score for a few months. Hard inquiries can be more problematic, however, if you accumulate a bunch of them. More than five hard inquiries within a two-year span is often seen as risky and can have a more significant impact on your odds of getting approved for credit.”

— Ted RossmanSenior Industry Analyst, Bankrate

A hard credit inquiry can remain on your credit reports for two years, although they usually affect your credit score for only the first year.

Applying for a credit card also adds a new account to your credit report, which can have both good and bad consequences.

“Having more accounts or a better mix can help your credit score, but adding a new account can also lower your average age of credit, which can lower your score,” explains Kendall Meade, a certified financial planner with SoFi. “It also gives you more credit available, which can decrease your credit utilization if you do not use the amount that can increase your credit score.”

If you already have poor credit, using a new credit card irresponsibly can further lower your score and make a bad credit situation worse.

“The biggest mistake that can be the hardest or take the longest to correct is having missed or late payments,” adds Meade. “It’s important to never charge more to a credit card than you can afford to pay off so that you can avoid late or missed payments.”

How too many credit applications can hurt you

Another mistake that can be harmful to those with poor credit is to apply for too many credit cards within too tight of a window.

“Applying for numerous credit cards within a short period can significantly hurt your credit score due to a cumulative effect. This behavior can lower your score by 5 to 10 points per application due to multiple hard inquiries,” cautions personal finance expert Andrew Latham, a certified financial planner with SuperMoney.

Let’s say you apply for five different credit cards within 12 months. If so, your credit score could plummet by up to 50 points. If, for instance, your score was 615 before you applied, it could end up below 580, which would place you in the “poor credit” category.

“This frequent application behavior also raises red flags for lenders,” Latham adds, “as it may appear that you are in financial distress and are desperate to increase your credit limit.”

Racking up a lot of hard inquiries in a short span can definitely make you seem like a risky prospect, which could result in denial of card approval.

“Chase, for example, has an unofficial but widely reported 5/24 rule,” Rossman notes. “This means if you’ve opened five or more credit card accounts in the past 24 months, Chase apparently views you as a card churner and doesn’t want your business. In this scenario, you could have a perfect credit score but still be rejected for accumulating too many recent accounts.”

Even if you are approved for multiple cards, having too many of them in your wallet can be detrimental.

“Numerous credit cards can be difficult to manage, and you can end up spreading your payments out too much to the point where you aren’t effectively earning perks on any of them.”

— Carter SeutheCEO, Credit Summit

The experts recommend spacing out each application for a different credit card, loan and other type of credit by around six months, at minimum.

“In other words, try not to exceed five hard inquiries in a two-year span,” suggests Rossman. “Especially if you are in the market for a mortgage loan or car financing, you might want to prioritize those. Mortgage lenders don’t like to see any credit profile changes during the underwriting process. So if you yearn for a new credit card to purchase furniture or finance a remodel, you would want to wait until after your mortgage loan closes so that you don’t impact your credit profile during the mortgage application process.”

Be aware that it’s not just applying for multiple cards too close together that can lower your score: A credit card denial can also ding your credit score.

How applying for the wrong credit cards can hurt you

What happens if you’ve applied for the “wrong” credit card? This move can come back to haunt you, too. Case in point: Applying for cards that you have a low chance of being approved for can result in unnecessary hard inquiries.

“Wrong” cards often include premium cards that look tempting, as well as cards that promise significant rewards. Problem is, if you already have bad credit, you’re likely going to get turned down for these accounts because they usually require a higher credit score.

“Certain credit cards can definitely be wrong for you,” Seuthe says. “For example, some cards have extremely high annual fees, while others have little to no rewards, so you aren’t gaining anything by using them.”

Opening the wrong card could also have other negative effects on your finances aside from lowering your credit score.

“For example, what if you impulsively sign up for a store credit card with a 33 percent interest rate and run up a big holiday shopping bill?” asks Rossman. “That could cost you a ton of money in interest.”

Particularly when your credit rating is lower, it’s better to only apply for and use a credit card if you are sure you can pay your balance due in full every month and avoid costly interest charges every month.

What should you do after a credit card application is denied?

Applied for a preferred card but got rejected? Take the next steps after a denial: Find out why and appeal your case.

“It’s important to learn why you were rejected. Lenders are required to tell you,” says Rossman, who notes that learning the reasons can help address these issues.

You may, in fact, receive an adverse action letter from the credit card issuer that indicates the reasons why you were rejected. You can then take action steps to, for example, improve and monitor your credit score, after which time you can reapply for that card and hopefully get the green light.

Alternatively, you may be able to plead your case to the card issuer and request an approval reconsideration.

“For instance, some applicants can get a second chance at credit if they reallocate some of their existing credit lines,” Rossman says.

Let’s say you already have two credit cards with an issuer, each with a credit limit of $7,500 (totaling a $15,000 limit), but you desire a third card. The lender might not want to give you more credit exposure, but they could be willing to add a third credit card and split the credit lines so that each account has a credit limit of $5,000.

If you are turned down for a credit card, it’s also recommended to review your credit reports for errors and inaccuracies and work to have those corrected by the three credit reporting bureaus — Experian, TransUnion and Equifax.

“Perhaps you reported an insufficient income on your credit card application and didn’t realize you can also include bonuses, investments, your spouse’s income and other sources. That could be grounds for reconsideration, too,” adds Rossman.

How to find the best credit card for your credit score

Before applying for a given credit card, investigate further and phone the issuer, if necessary, to learn what the minimum credit score needed is for approval. Steer clear of cards that are above your score range to avoid unnecessary hard credit inquiries and guaranteed denials.

To help choose the right card when you have a lower credit score, research and compare cards online to find one that matches your credit score and financial situation. You can also try Bankrate’s CardMatch tool, which can provide you with personalized recommendations. Bankrate even has an approval odds feature on many of our credit card comparison pages that can be tailored to your specific circumstances.

Perhaps the “right” card for you is one that offers a 0 percent introductory rate promotion.

“If approved, you could pay your balance due in full before that introductory rate period expires, saving big money on interest,” Rossman adds.

If you are trying to establish credit for the first time, you may have to begin your credit journey with a secured credit card.

“With this type of card, you give the issuer a certain amount of money, and that is the amount they allow you to spend,” says Meade. “A secured card can still help you establish a credit history but requires you to provide the money upfront.”

Still having a hard time finding and getting approved for a credit card?

“Maybe it’s best to stick to cash and using debit cards for a while so that you don’t slide into debt you can’t repay,” Rossman says.

The bottom line

Don’t get discouraged if it takes some time to find or get approved for the ideal credit card for your needs. And remember that a low credit score can be improved with effort, including paying your bills on time and in full, paying down balances on revolving credit accounts and not applying for too many credit cards in a short amount of time.