Adding a second card could help build your credit score

This post originally appeared July 27, 2017 on as “‘Q&A: Why a recent graduate should get a second credit card

By Barry Paperno

Dear Speaking of Credit,
I am 22 years old and have had a Chase Freedom credit card for about three years now. I always pay my balance on time and have never been late. I try to use the card as often as possible.

I recently graduated from college and am looking for ways to help increase my credit and set me off in the right direction. This past month I accumulated two hard inquiries on my credit for a car lease and for an apartment. I am going to be attending graduate school for the next two years.

I was thinking of applying for a second credit card, but I am not really sure what to do. I guess my questions would be whether I should get a second card, and if so, which card should I look into? – Vin

Dear Vin,
Congratulations on graduating college. Achieving both a diploma and a three-year credit track record by age 22 says you’re already headed in the right direction.

Hopefully, you were approved for both the car lease and apartment rental that together added a couple of hard inquiries to your credit report. If so, those inquiries and a new car lease, which is treated just like a loan by the credit scoring companies, could lower your credit score a little from when you started.

Don’t worry, though You can regain those points pretty quickly – in three to six months – with on-time payments, low card utilization (balance/credit limit ratio), and, as we’ll discuss, moderation when it comes to future credit applications.

Reasons to apply for a new credit card
There are many reasons now to apply for a new credit card, including:

  • A credit limit that increases your total available credit.
  • A lower interest rate than what you’re currently paying.
  • Attractive balance transfer offers to help pay off higher-interest card or loan balances.
  • Rewards points and cash back that can save you money on everyday purchases, such as gas, groceries and restaurants.

Your goals appear to be increasing the amount of credit you have available and building a higher credit score over time. And for good reason. Not only does a high amount of available credit allow you to make large purchases more conveniently when you need to, but you can more easily control your utilization ratio when a higher balance is unavoidable. A higher score is also a ticket to better credit offers and a quick mortgage approval when that time comes.

So, let’s address your two questions and make some recommendations.

Question No. 1: Should you get a second card?

Answer: Yes, for a couple of reasons:

  • Obtaining a favorable APR, scoring rewards points and lowering your credit utilization all make sound financial sense.
  • Carrying more than one card tends to be considered a good thing for credit-scoring purposes.

Yet, be careful. You can have too many cards, which can be counterproductive for your score. While the ideal number varies according to each consumer’s overall credit profile, FICO high achievers (people with scores higher than 785) tend to have an average of seven cards opened over many years.

Recommendation: Apply for more cards, but no more than one or two per year, eventually stopping at seven or so.

Such gradual growth in your credit portfolio can minimize any negative impacts to your score from inquiries and new trade lines, as new accounts are allowed to age before introducing new ones to your credit report.

  • Before applying for a card, do some research into which card products are a match for your credit profile. By doing this you reduce the chances that your application will be denied because you won’t be seeking cards that require the highest scores.
  • Instead, look to the cards that cater to credit-building consumers with good-but-still-growing credit scores.

Question No. 2: Which card should you consider?

Answer: While all cards disclose their APR, fees, rewards programs and other terms upfront, when it comes to anticipating the credit limit you might receive, all you can really do is apply and hope for the best. Seriously.

  • Don’t expect the card company to tell you if your credit limit is likely to be closer to $100, $1,000 or $10,000. Unfortunately, it’s a bit like seeking an auto or home loan with no idea of how much credit you’re applying for.
  • In their defense, the card issuers will truthfully tell you they must fully evaluate a consumer’s creditworthiness before making a credit limit decision.
  • Furthermore, nor will you know what APR you will be given in the range advertised. The logic would be the better your credit scores, the more likely you will be awarded with an APR on the low end of the scale, but that’s not always the case. No matter what APR you’re given, if you continue to pay off your entire balance every month, you won’t have to worry about interest charges.

Recommendation: As a card application strategy, since you won’t know how much of a credit limit to expect when applying, go for the card that your research tells you comes with the best chance of approval for someone with your credit history – regardless of any rewards or other terms. Then, as time goes on and your score rises, you can pick and choose from among the highest-rated cards.

Next steps
Most card issuers will make you eligible for a credit limit increase after one year of paying on time every month. This could be helpful to remember, particularly if you find yourself disappointed with the credit limit assigned to a newly opened account.

Then looking further ahead, expect to qualify for future increases every couple of years, until eventually landing you in that FICO high achiever world.

In the meantime, keep up the good work!

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