When you are applying for a credit card you want your credit score to be as high as possible so you get a card with the best rate available. This is pretty obvious, but what’s not always so obvious are things you might be doing that are lowering your credit score. By knowing what can potentially lower your score, you can work to keep your score high when it counts the most like when your applying for new credit. Whether you have excellent credit or poor credit, here are 5 things you should not do when you are applying for a new credit card.
- Applying For Lots of Credit
Part of your credit scores factors in the number of credit inquiries you have. A credit inquiry shows up on your credit report every time your credit report is checked or requested. You might not realize this, but having your credit checked can actually lower your credit score. Ten percent of your credit score is determined based on these credit inquiries. So when you are trying to find a credit card that works for you, you should not apply for every card out there. In addition, you really only want to apply for cards that you know you have a good chance of obtaining. This will limit the amount of credit inquires and keep your score as high as possible while your in the process of applying. - Using Too Much Credit
A good portion of your credit score is based on your debt to credit ratio. A simple way to think about your debt to credit ratio is to take the amount of debt you have used and divide it by the amount of available credit. For example, if you have a $3,500 balance on a card that has $10,000 in available credit, then your credit to debt ration is 35%. Anything over 35% is considered high and can lower your credit score. If you are applying for new credit then you should reduce your credit to debt ration by as much as you can. - Missing A Payment
Paying your accounts on time is 35% of your overall credit store, that’s a big portion of your credit score. The best thing you can do to keep your score high and have the best chance possible of qualifying for the card you want is to always make your payments on time. If you miss a payment or even make a late payment then that can be reported and hurt your credit score. - Canceling Other Credit Cards
Often people don’t know this, but when you cancel a credit card you are effectively reducing the amount of available credit you have which lowers your credit score. Reducing your available credit can hurt your score because it could drive up you overall debt to credit ratio. The other problem with canceling a card, especially one that you have a good history with, is that it could be removed off of your credit history. - Co-Signing for Someone Who Is A High Credit Risk
When you co-sign you are ultimately responsible for what ever is being borrowed. This means you could end up making payments on a loan you co-signed for. As a co-signer it is possible your credit could be negatively affected if the account is not managed properly. When you co-sign the credit history of the account shows up on the cosigner’s credit, missed payments and all. The best way to have a successful co-signing experience is to set some rules up before you sign on the dotted line.