Does Applying for a Credit Card Help or Hurt My Credit?

Does Applying for a Credit Card Help or Hurt My Credit?

 

This is a common question we hear and unfortunately, when it comes to applying for credit cards, there is no hard and fast answer that applies for everyone.  The truth is that applying for a credit card affects different people in different ways, so the answer is really “it depends.”

Here are some common scenarios that might fit your circumstances.

If you have minimal or no credit.

Sometimes it can be difficult to get approved for a credit card if you have no established credit, and it could be necessary to get a secured credit card at first.  But whether or not the card is secured by deposits or a true credit card, opening a new card account is a smart idea if you have little or no credit.  You must have credit and use it responsibly in order to achieve high credit scores.  Make sure all payments are made on time and it’s a perfect way to build your credit profile.

If you already have excellent credit and multiple trade lines open.

If you are fortunate enough to already have great credit scores and you have been utilizing credit responsibly for years, then opening up a new card account will probably have little effect on your existing credit scores.  You’ll obviously want to make timely payments and keep the balance on that new card under 35% but if you do these things, your new card will likely be a positive boost on your already excellent scores.

If you have poor or average credit and existing credit card debt.

This is the scenario where applying for a credit card could hurt you.  If your existing credit is poor or average with a few late payments and you already have some credit card debt that you are not paying off each month, that new credit card could be interpreted by the credit bureaus as a warning sign.  They often will look at this type of credit profile and downgrade it, as additional credit can often equate to a higher risk.  In addition, that new card will likely come with higher fees and interest rates because of the marginal credit history.  Think very carefully before applying for a new card account if you are in this situation.

A smart option is getting your credit repaired prior to applying for that new card.  By getting negative items legally removed from your credit report, you’ll almost always qualify for better terms on that new card and in the long run, it will save you a good deal of money.

If you have questions about any of this information, please feel free to contact our office. We do offer free 30 minute phone consultations!