Sometimes getting a new credit card can pay off.
You may be able to qualify for a sign-up bonus exclusive to new cardholders, which gives you free miles, points or cash back. You can also take advantage of the benefits offered by the card, as well as their rewards program if they offer one.
But there are some situations where you should generally avoid trying to apply for a new credit card. In particular, if any of these three things apply to you, you should probably wait a bit before submitting a new credit application.
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1. You will soon take out a large loan
When you apply for a new credit card, it can temporarily lower your credit score.
This is because an inquiry will appear on your credit report when the card issuer performs a credit check. And too many inquiries can worry lenders about over-indebtedness. A new card also lowers the overall average age of your credit history, and a longer credit age results in a higher score.
These blows to your credit are usually temporary and of no great importance, unless you soon apply for a large loan, which can include:
Having a lower score when applying for these big loans means that you could end up paying thousands of extra dollars in interest rates on the loans over the life of the loan.
It is not worth the advantages offered by the credit card in making eligibility for a larger loan more expensive. Just wait until you’ve completed your loan for the big loan and so get the card you are interested in.
2. Your credit score is not very good
If your credit is not very good, you may not be able to qualify for many credit cards. You’ll end up with an investigation of your credit report – which, again, can lower your score even further – and you won’t get a new card to show for it.
In most cases, it’s best to wait until you can improve your credit score and start applying for some of the best rewards credit cards. The exception, however, is if you don’t already have a card.
In this case, you can request one of the following:
If you find a card that you have a good chance of being approved for, you can apply, hopefully get the card, and start making payments on time to improve your credit score.
3. You just applied for a new credit card recently
If you’ve applied for one or more new credit cards recently, it might also be worth waiting for you to get a new card.
Applying for several new credit cards at the same time worsens the damage to your credit score. You will get several difficult inquiries which will lower your score. And lenders may start to worry about your spending spree, making denial more likely.
Applying for several new credit cards in a short period of time can also increase the chances that you will be refused approval. This is because some card companies have strict limits on the number of cards you can open in a given time period. For example, Chase’s 5/24 rule means you can’t get a Chase card if you’ve opened five or more credit cards in the past 24 months.
If any of these three signs apply to you, you might want to stick with the cards you already have in your wallet and wait a bit before trying to get a new one.