There are legitimate reasons to obtain new credit cards on a recurring basis. You can apply for a card that is more aligned with your spending habits or offers cardholder benefits that you do not presently have. Alternatively, you may choose to sign up as a result of a new cardmember incentive, which may include free money, items, or travel if you meet certain requirements.
While getting a new credit card is frequently the best financial decision, there are some scenarios in which you should avoid doing so. Three indicators that now is not the time to apply for new credit.
1. You’ve opened a significant number of credit cards in the last year.
If you’ve opened multiple credit cards in the last year or two, this is a solid indication that you should definitely hold off on applying for another.
Certain creditors may deny your application for fresh credit if you’ve lately opened an excessive number of cards. Even if you are accepted, your credit score may suffer if you have too many credit queries in a short period of time.
When creditors check your credit, they make hard inquiries on your report, which remain on your record for two years. Additionally, excessive questions can lower your score.
Your credit score is also determined using the average age of your credit. Lenders like a lengthier average since it indicates you’ve been paying your obligations on time for a long period of time and aren’t racking up additional debt you can’t repay. However, when you open a new credit card, your average age of credit decreases.
2. You lack control over your spending.
If you’re concerned that you won’t have control over the amount you charge on a credit card, it’s usually advisable to avoid opening one. It’s all too easy to slip into the trap of taking on high-interest debt that you can’t afford to return immediately.
When you’re getting ready to get a new credit card, it’s a good idea to create a precise budget to keep track of your spending – and to help you pay off any balances you incur before interest accrues. Otherwise, the interest costs associated with the majority of credit cards will outweigh any membership benefits, cardholder perks, or new cardmember bonuses you obtain. You may also get a victim of loan stress if you will take a loan blindly.
3. You’re about to take out a huge loan.
Because obtaining a new credit card will temporarily lower your credit score, it can have a detrimental effect on your ability to qualify for other forms of loans at affordable rates. Increased debt can also cause lenders to worry that you’re getting in over your head.
Large loans, such as mortgages and vehicle loans, can become significantly more expensive if the interest rate on a recently established credit card increases even little. Taking this hit is frequently not worth it, particularly if you can wait until after you’ve taken out the large loan to open a new card.
If any of these symptoms apply to you, delaying the opening of a new credit card is certainly the prudent financial move.
