Thinking of opening a new credit card? You should consider how it might impact your credit score first. Here’s what you should know before signing on the dotted line.
When you open a new credit card, a hard inquiry is conducted by the issuer. That means the issuer pulls your credit report to see how creditworthy you are. When a hard inquiry is made, regardless of if you’re approved for the card or not, your credit score takes a hit. This is usually temporary and only a small ding, but if you apply for a few cards in a short period, your score could take a severe dive.
The best time to open a new credit card depends on the card company. As CNBC notes, different issuers have different rules. Chase cuts you off if you try to apply for five cards within one year. Capital One limits consumers to only two of its cards. In general, most experts say that you should wait at least six months after the last card you opened to apply for a new one.
Think It Through
Before you open a new card, think through why you want it and how it could impact your financial life. Make sure your finances are in order and you can handle the card payments. Remember that applying for a new card doesn’t happen in a vacuum — it impacts your entire financial life. For example, if you’re hoping to apply for a mortgage, opening a new card could hinder that process. As with anything involving your finances, opening a new card should not be taken lightly.