Your credit report and credit score can have an impact on many aspects of your life, from being able to borrow money when you need it to the price you pay for insurance, to whether you are hired for a new job. A variety of factors influence your credit score, including how often you’re applying for new credit. You may wonder “How can I apply for new credit strategically?”
Little or No Credit History
If you haven’t had a credit history up until now, you’ll need to establish credit so that you can begin to build a positive history of payments made on time. One of the easiest ways to get started is with a secured credit card, which is secured by money you put in a deposit account. Other options include retail store credit cards and a credit builder loan.
Building Your Credit History
Within a year, if you pay your payments on time for your secured credit card, the creditor may be willing to convert it to an unsecured credit card. The retail store card that helped to get you started probably has a high-interest rate, so you may want to replace it with a card that has a lower interest rate.
How Often to Apply for New Credit
Whenever you apply for a new credit card or loan, the potential lender runs a credit check, which is called a hard inquiry. Too many hard inquiries in a short period of time can bring down your credit score. It’s a good idea to allow at least six months between applications to avoid harming your credit by applying for too many new accounts.
Credit Mix
Another factor considered in determining your credit score is your credit mix. Ideally, you should have a mix of different types of credit such as a student loan, credit card, car loan, mortgage, and personal loan. To apply for credit strategically, work on gradually establishing a mix of different types of credit. Be careful not to apply for new accounts too frequently, and make sure you can afford the payments before deciding to borrow more money.
Credit Utilization
Part of your strategy should include watching your credit utilization, which is the percent of available credit you use on revolving accounts. It can be tempting to apply for multiple credit cards when you get invitations in the mail for cards with enticing deals, but if you open several credit cards and use all of them, you may end up with bills that are becoming unmanageable. Avoid using more than 30 percent of your total available credit.
Knowing Where Your Credit Stands
Before applying for any new credit, know what’s on your credit report. Check your credit reports at least annually to make sure the information being reported is accurate. Dispute any incorrect information you find right away, Dovly is an AI credit engine that can help you dispute any errors you find on your credit report. Try it risk-free with our free membership tier. Get in touch with Dovly today.
