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Does getting a second credit card hurt your credit score?

Does getting a second credit card hurt your credit score?

There are a range of reasons you may be considering taking out a second credit card, including to capitalise on rewards point signup bonuses or if you and your partner need a joint credit card for everyday expenses.

However, you may be wondering how this may affect your personal finances and does getting a second credit card hurt your credit score? Let’s explore what can affect your credit score and whether having multiple credit cards is good or bad for your credit history.

Will taking out a second credit card affect your credit score?

Put simply, yes. Applying for, using, and making repayments on any credit products, including credit cards, home loans and personal loans, will affect your credit score. This includes taking out a second credit card or applying for multiple credit cards at once.

Your credit report will keep track of the following, all of which can impact your credit score:

  • Money you borrow, including loans and credit cards
  • Your repayment history
  • Credit applications
  • Debt agreements
  • Default
  • Bankruptcy

Whether you already have a credit card or not makes little difference, as this type of financial decision is always reflected in your credit history; for the good and the bad.

The positive impacts of a second credit card on your credit score

When used with good financial discipline, a second credit card may help to boost your credit score. Demonstrating good credit behaviours, such as consistently paying off your balance in full each statement period, may help to increase your credit score. This is because card issuers now report on your positive credit behaviours to the main credit reporting bureaus (Experian and Equifax), not just the adverse events

Further, credit cards should be seen as a financial tool and not necessarily something to fear. Meaning, if you can manage your credit card repayments and not accrue debt, having a second credit card account on your credit report could see your credit score increase. In fact, oftentimes credit card customers may see their credit score decrease when they close their accounts.

The negative impacts of a second credit card on your credit score

The most obvious way a second credit card may hurt your credit score is if you allow your debt and interest charges to snowball out of control.

Any negative credit behaviours, such as taking out multiple credit cards and missing your minimum repayments, may be reported in your credit history and decrease your credit score.

Unfortunately, it can be very easy to misuse a credit card. And, when paired with interest rates in the high teens, a maxed-out credit card balance can quickly turn into serious debt

Also, if you’re applying for a second credit card but your personal financial situation has changed since your last card approval, such as a reduction in income, you may not be approved as you may not meet the eligibility criteria. Being rejected for a second credit card will be reported in your credit history and may hurt your credit score.

Additionally, if you’re looking to make a joint application with the second credit card, the financial situation and credit history of this person will come into play. You will both need to meet the provider’s eligibility criteria to be approved. For example, if your combined income doesn’t meet the eligibility criteria, or if the additional cardholder has a bad credit score, this may affect your chances of approval.

Does applying for multiple credit cards hurt your score?

If you’re in the market for a second credit card, you may be considering applying to multiple credit card issuers to better ‘hedge your bets’ that you’ll be approved. Unfortunately, this is an easy mistake to make that will generally hurt your credit score and ability to be approved for credit products in the future.

When you apply for any credit product, the provider will perform a hard credit inquiry into your credit history. Every time this occurs it will be recorded in your credit report. If you apply for multiple credit cards at once, the card issuers may see these multiple applications. This is considered risky behaviour by providers and may demonstrate a lack of financial discipline.

It’s more likely that the lender will reject your application if they can see multiple hard credit inquiries at once in your credit report. And, unfortunately, multiple credit card application rejections will only further hurt your credit score.

Having multiple credit cards is neither good nor bad, but a reflection of how you use this credit product. However, you’ll always want to try to apply for just one credit product at a time

  • Curious as to how your credit score currently sits? RateCity helps everyday Aussies get a free copy of their credit scores across the two major reporting bureaus without performing a hard credit inquiry. Discover your credit scores today.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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