Applying for a new credit card is a financial minefield to navigate without the right help. Just one misstep and the whole thing can literally blow your chances—and your credit—up! Fear not though, Sperity is here with a handy guide for avoiding potential credit hazards when applying for new credit. Here is the list of what NOT to do when applying for credit.
Letting your credit score slip.
How it hurts: Credit card companies assess your score as the basis for making their decision to open a line of credit up for you. Low-score credit opportunities are a thing of the past.
Exaggerating your income.
How it hurts: Being misleading on a credit application is fraudulent, and you could be penalized for it with jail time and/or fines.
Having subprime loans on your report.
How it hurts: If your "credit mix" (this accounts for 10% of your score) contains too many subprime lenders, it may cause other credit card companies to reconsider giving you a card.
Applying more than one credit card or loan.
How it hurts: Whether you’re just trying to find the best deal or you’re casting a wide net in the hopes of any approval, think twice before sending out a mass of applications. Multiple credit inquiries drag down your “new credit analysis”—another 10% of your overall approval score.
Using too much credit.
How it hurts: The ratio of credit utilization factors for 30% of your credit score. Maxing out your other cards will render you too high a risk for a new account.
Not checking your credit report for errors.
How it hurts: Any number of small mistakes can have an impact on your credit report. Sperity’s best credit repair services can help you fix these to reduce the damage they can have on your credit score.
Canceling other cards.
How it hurts: Don’t cancel accounts in good standing with other companies. This ‘shortens’ the credit history length on your report (15% of your score), can reduce the amount given to you in available credit and drives up your debt utilization ratio if you have large balances on other cards.
Avoiding credit altogether.
How it hurts: You may think this is a smarter move but you need a healthy, active credit history to be able to apply for a credit card or a loan.
Co-signing a loan for someone who is high risk.
How it hurts: Avoid taking on the responsibility for another person's credit decisions by co-signing a loan.
Missing a payment.
How it hurts: Weighing in at 35%; making payments on time accounts for the largest chunk of your credit score.
If you have more questions, we are always happy to answer them. You can reach us here: WeAreSperity.com