Youve Got Good Credit
If your credit score is in the range of good to excellent , your chances of being approved for a new credit card are much better than if you had a poor or fair credit rating If you are confident about your credit score it could be a good time to apply for a new credit card.
As long as you dont have a pressing need for a credit card right away, it could be beneficial to spend a few months building up your credit score. Depending on your starting point, boosting your credit score could take you from fair to good credit or from good to excellent credit, making you eligible for cards you might not otherwise have been approved for and help you get a better interest rate.
Applying For A Credit Card
can have an impact on your credit score. So if youâve decided to apply for a second card, you should brush up on what happens when you apply for a credit card.
Once you apply for a card, lenders will do a hard inquiry on your credit report. And according to FICO, a hard inquiry can have a negative effect on your credit score by just a few points. Having too many inquiries on your credit reportâespecially within a short period of timeâmay also have an impact, the CFPB says.
Find Out if Youâre Pre-Approved
If youâre concerned about a drop in your credit score, consider finding out if youâre pre-approved before you apply. Pre-approvals generally donât impact your credit score and give you a reasonable expectation of whether you qualify for a particular card.
Not sure what card you might qualify for? Capital Oneâs pre-approval tool is a quick and secure way to find out, with no impact to your credit score.
If your application isnât approved, donât give up. Practice good credit habits, monitor your credit score and consider applying again once youâre in an improved position.
Advantages Of Being A Multiple Credit Card Holder
The pros of having multiple cards include:
- Earn maximum rewards: Multiple credit card holders can earn maximum rewards on purchases. Some cards might give you rewards on gas while others offer cash back. If you travel often, having one card that offers miles and another that earns hotel rewards can give you access to additional, travel-specific perks like room upgrades and anniversary nights.
- Low credit utilization ratio: Having more than one credit card can boost your credit score by helping to lower your . Your credit utilization ratio is the amount of credit you’re using compared to the amount of credit available. Most lenders prefer to see it at 30 percent or lower.
- Backup cards: It can be very helpful to have more than one card if one of your cards is lost or stolen since it could take more than a day or two to receive a replacement card.
- Save with balance transfers: You could save money on interest by moving a credit card balance on a high-interest card to one with a lower rate.
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Your Credit Card Costs Too Much
While you’re building your credit, it usually doesn’t make sense to open multiple credit cards. You’re better off sticking to one card until you have good credit — unless your current credit card has unnecessary fees.
Some credit cards that are easy to get are way too expensive. If you’re paying a monthly or annual fee for one of these cards, you should see if there are any no annual fee credit cards you could pick up as a replacement. It could be worthwhile to open a new card and close your old one if it’s costing you money.
To sum it up, you should usually only apply for a new credit card if you have good credit — a FICO® Score of 670 or more — and you don’t have any upcoming loan applications. If you don’t have good credit, then you should avoid applying for new cards, unless you either don’t have a credit card yet or the card you have charges too much in fees.
How Does Opening A New Credit Card Affect Your Credit Score
First, let’s look at how a new credit card might help you improve your credit score:
- Increase available credit: Opening a new credit line increases your available credit, which can positively affect your credit score. The key is to keep the balance relatively low so your available credit stays high. This is known as your , and it’s best to keep your overall credit usage under 30%. For the best impact on your scores, keep your credit utilization as low as possible.
- Improve credit mix: Your refers to the different types of accounts you have in your credit file. There are many types of debt accounts and two broad categories: installment credit and revolving credit. Installment credit refers to loans you take out and repay a single time, such as mortgages, car loans and personal loans. Revolving credit refers to accounts you can charge a balance on, repay and reuse, such as credit cards and home equity lines of credit. Credit mix makes up 10% of your score, so opening a new credit card may be helpful if most of your existing accounts are installment loans. That said, avoid opening a credit card solely to diversify your credit accounts.
- Opportunity to establish strong payment history: Payment history comprises 35% of your credit score, making it the No. 1 influence on your credit. When you open a new credit line, you have a chance to build up a history of on-time payments by paying your bill by the due date every month.
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You Only Need One Card To Build A Good Score
Using credit consistently and responsibly is really the only way to build a good credit score. For most people, the easiest way to do this is to get a credit card, use it conscientiously and make payments on time. This will add up to a lot of positive information on your credit reports, and, consequently, a better credit score.
But will you reap even more credit score benefits by having multiple credit cards? NerdWallet reached out to Anthony Sprauve, senior consumer credit specialist at FICO, which is responsible for the most widely used credit scores in the United States. You dont need multiple credit card accounts to have a good FICO score,” Sprauve said in an email. “You can have a high score with one well-managed credit card account.
It’s a common misconception that you need multiple credit cards to have strong credit scores. That idea may be rooted in a misunderstanding about one element of credit scoring formulas: the mix of credit accounts on your report. Credit mix accounts for 10% of your FICO score. But “mix” in this context refers to having different types of accounts on your credit report.
You are rewarded for having multiple kinds of accounts auto loan, mortgage, line of credit, etc. but you are not penalized if you dont,” Sprauve explained.
If Youre New To Credit Or Have Bad Credit
If youâre new to credit, or have had credit problems, youâll need a card thatâs designed for your credit profile. Typically, those who are new to credit but havenât had any problems will qualify for a simple card that doesnât offer rewards, or a store credit card.
But if youâve had serious credit problems, then youâll need to look for a card specifically designed to rebuild credit. These will be either a so-called subprime card, or a secured card.
A subprime card will offer a very small line of credit and usually imposes high fees and interest rates.
In contrast, a secured card will have a much lower annual fee, if any, and can have a much lower interest rate.
However, a secured card will require you to submit a refundable security deposit before you can open your account. Otherwise, a secured card works exactly like a standard, unsecured card.
While there’s no minimum credit score needed to apply for a secured card or even a subprime card, you shouldn’t have any pending bankruptcies or delinquent accounts or your credit card application may be rejected.
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Does Having More Credit Cards Help Your Credit Score
Having multiple credit cards can helpbut can also hurtyour credit score. It all depends on how well you manage the cards that you have.
No matter how many credit cards you have, the same rules apply: Keep your balances low, and always pay bills on time. While the number of cards that you carry likely wont affect your score in itself, you should avoid applying for several new credit cards at one time. Over time, if managed properly, more cardsand thus a higher credit limitcan help you improve credit scores.
What Are The Pitfalls Of A Second Credit Card
Now that you know how a second card can benefit you, take a moment before jumping at that credit card offer in your mailbox to consider the problems a second card can create.
The offers you receive in the mail, even with transparent advertiser disclosures, may not be telling you the whole story. There are some valid reasons you should avoid getting a second or third or even fourth credit card.
Those reasons include:
- Another card can create problems paying your bills on time.
- Another card can create more debt problems after you balance transfer card debt.
- Another card can create obstacles when you are looking to make a major purchase like a car or home.
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Pay Off Your Credit Card Balances With A Personal Loan
Because credit utilization rates are a reflection of how you use revolving credit, you could take out a personal loan, pay off your credit cards and effectively move the debt to an installment loan . An installment loan is a loan that you repay with a set number of scheduled payments over time. Types of installment loans include auto loans, mortgages and personal loans.
However, there are multiple drawbacks to this approach. Youll need to qualify for the loan and may have to pay an origination fee on the money you borrow.
And to qualify for the best interest rates on a personal loan, you need to have excellent credit . If you have average or poor credit, the interest rate on the personal loan may be higher or lower than that on your credit card.
When Should I Apply For Another Credit Card
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To decide whether it’s time to apply for another credit card, the most important consideration is your credit score.
If your score has improved since you got your last card, you may qualify for a card with rewards and benefits you couldn’t have before. Or if you’ve only been an on another person’s card, you might explore getting your own.
Applying for another credit card could also be worth it if your credit file is “thin” or an additional card could improve your credit utilization ratiothe credit you’re using relative to your overall credit limit. Here’s how to know when it’s time to apply, and when it could be better to wait.
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Pay Down Your Balance Early
One tricky point about credit card utilization rates is that your usage depends on the balance that your cards issuer reports to the credit bureaus, not how much you spend each month. Those two numbers arent always the same.
Also, your issuer may not even report to all three of the major credit bureaus, Equifax®, Experian® and TransUnion® and in some cases, it may not report to any of them.
Typically, issuers report the balance at the end of your billing cycle.
However, some issuers may send the data at the same time each month for all cardholders, regardless of when your billing cycle ends. Your best bet may be to ask your issuer so you can be certain.
What this means is that your issuer may report your billing cycles balance before you pay it off. This reported balance will add to your credit utilization.
However, if you pay down part, or all, of your balance before issuers report your balance for the billing cycle, your credit utilization rate for that card will go down.
Can You Have Two Of The Same Credit Card
Many credit card issuers will indeed approve you for another one of their credit cards as long as you meet the qualification criteria. And, if youve always managed your current credit card well, that may make it easier for you to get approved for the new credit card.
However, dont assume that youll get approved for the exact same terms as your current credit card. The credit card issuer will approve your application based on your current income and credit standing, which may have changed since you applied for the first card.
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More Cards Could Give You An Indirect Boost
Although adding extra credit cards to your profile wont directly help your score, it could provide an indirect lift by reducing your . Utilization is simply the amount you owe on your cards divided by your available credit. It plays a major role in the 30% of your FICO score that’s determined by amounts owed. The lower your utilization, the better below 30% is preferable, and below 10% is ideal.
Utilization is calculated on each of your individual cards, as well as across all the cards in your name. Opening a new card account will boost your available credit, which can drive down your overall utilization, and that could have a positive effect on your score. This assumes, of course, that you don’t run up a big balance on the new card.
Keep in mind, though, that opening a new card account can have both positive and negative score effects. For one thing, a new credit application will usually trigger a hard credit check, causing your score to take a small, short-term hit. A new card also lowers the average age of your open accounts, which could negatively affect the 15% of your credit score determined by the length of your credit history especially if you have a short credit history to begin with.
How A Second Card Helps In Emergencies
This may seem obvious, but its still an important feature. If you have multiple cards, then you have an emergency option if something happens to your primary card.
This really comes in handy when you travel. A lost card when you are on vacation can create a personal finance crisis. But having that other option can tide you over until your credit card issuer gets you a replacement plastic.
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Will Closing A Credit Card Hurt My Credit Score
Sometimes closing a credit card can raise your credit utilization rate and reduce your average credit age and number of accounts, all of which can negatively affect your score. After taking in to consideration any annual fees you may be paying, in some cases it may be better to keep older, unused credit card accounts open.
1 Reducing debt and maintaining low credit balances may contribute to an improvement in your credit score, but results are not guaranteed. Individual results vary based on multiple factors, including but not limited to payment history and credit utilization.
2 Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.
Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.
A representative example of loan payment terms is as follows: you receive a loan of $13,411 for a term of 36 months, with an interest rate of 12.16% and a 5.30% origination fee of $711, for an APR of 15.99%. In this example, you will receive $12,700 and will make 36 monthly payments of $446.46. Loan amounts range from $1,000 to $40,000 and loan term lengths are 36 months or 60 months. Some amounts and term lengths may be unavailable in certain states.
“LendingClub” and the “LC” symbol, and “Radius” and the “R” symbol, are trademarks of LendingClub Bank.
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Ask For A Credit Limit Increase
A higher credit limit is another way to help reduce your credit utilization ratio, which can help raise your credit scores. Keep in mind though that some credit issuers do a hard credit check when you request a credit limit increase, and that can cause your credit to dip. Read up on how to ask for a credit limit increase.
Should I Get Another Credit Card To Help My Credit Score
I currently have two credit cards, one with a $500 limit one with a $4700 limit. I use them for small purchases and always pay them off straight away so they are currently on zero balance. I also have an auto loan, which I currently owe approx $22500 on. I have been in the USA for 18 months, since moving here to marry my American wife. My True Credit report says I can improve my score by opening another credit card account. My score peaked at 710 earlier this year, but it dropped to the high 600’s after taking the car loan in April this year. Do you think it would help my score to get another credit card? Thanks.
Sub: #1 posted on Fri, 08/03/2007 – 11:11
Sub: #2 posted on Fri, 08/03/2007 – 11:18
Sub: #3 posted on Fri, 08/03/2007 – 11:19
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