Application overload: credit cards & your credit score

Application overload: credit cards & your credit score

Last updated: 04 December 2015

Did you know that making too many credit card enquiries can reduce your credit score by nearly 200 points? That’s what the Credit Savvy team has discovered in our latest study!

WHAT IS A CREDIT CARD ENQUIRY?

When you apply for a credit card, the lender can make an enquiry at a credit reporting body. Each time they do this it leaves a footprint on your file showing you’ve applied for credit, regardless of whether your application is approved or declined. These enquiries can stay on your credit file for five years so if you switch cards every year, you could easily end up with five enquiries on file.

WHAT DOES THIS MEAN FOR YOUR CREDIT SCORE?

Our study of 50,000 Aussies1 suggests that multiple credit card enquiries have a negative effect on a consumer’s credit score. Australians with five or more credit card enquiries on file have an average score 128 points lower than Australians without any enquiries, while those of us with more than seven credit card enquiries on file are on average 187 points worse off2.

When you consider that Experian credit scores are out of 1,000, and can be used by lenders to assess the risk of lending credit to someone, potentially being docked close to 200 points is something to think twice about.

HOW CAN I CHECK MY CREDIT CARD ENQUIRIES?

We encourage everyone to check what enquiries they have on their credit file – you can do this for free at Credit Savvy.

Remember to apply for credit only when you need it and have done your homework to make sure the product is suited for you before you apply. Continually applying for new credit cards might not be the best idea, as it can hurt your credit score and your ability to get that card or loan a few years later.

 

1 Study based on a sample of 50,000 Credit Savvy members as at 17/09/2015.

2 Numbers are based on an extract of Credit Savvy members and are only representative of these members.