It can be tempting to apply for new credit when you get enticing offers such as zero interest rate credit cards or rewards cards. There are some things to keep in mind if you’re trying to figure out when to apply (and when not to apply) for new credit.
Good Reasons to Apply for New Credit
Before you apply for new credit, keep in mind that too many inquiries in a short period of time can have a harmful effect on your credit score. Opening new accounts also shortens the average age of your accounts, which is another factor in determining your credit score that potential lenders may consider.
There are some good reasons to apply for new credit. These include:
- You’re at least 18 years old and you don’t have a credit history.
- You have a secured credit card that you want to replace with an unsecured card.
- You’re paying a high interest rate or an annual fee, and your credit score has improved, giving you the opportunity to have a lower interest rate and no annual fee.
Another good reason to apply for a new credit card is that you know you’re going to need to make a major purchase in the near future and you’re looking for the best deal for financing. It’s a good idea to wait a minimum of three months between applications for new credit and waiting at least six months is even better.
When Not to Apply for New Credit
Applying for credit at the wrong time can cause your application to be declined, and it can also make it harder to get approved for credit when you really need it. When is a bad time to apply for new credit? Some examples include:
- Impulsively or on a whim
- When you’re planning to apply for a mortgage or other large loan in the next six months
- When you just opened another new account
It’s not a good time to apply for new credit if you recently lost your job or if you’re having trouble paying your current credit card bills or have large balances on your credit cards. Avoid applying for new credit if you’ve had a lot of recent inquiries on your credit because potential lenders usually see that as a sign that you’re relying too much on borrowed money.
Improving Your Credit
Taking care of your credit can help you feel confident that you will be approved for a loan or credit card if you need it. Before applying for new credit, check what’s on your credit report to make sure it’s accurate. Errors on your credit report such as incorrect balances or accounts showing as past due that were never past due can bring down your score.
If you find any errors on your credit report, dispute them right away. Dovly can simplify this process for you with our automated credit repair engine that helps you fix and manage your credit report. Get in touch with Dovly today to find out more.