Will Applying For a Credit Card Hurt Your Credit?
In today's world, having a good credit history is viewed as a necessity.
The question of whether applying for a credit card can actually hurt your credit rating is a very valid one.
In a nutshell, the answer is yes.
Credit bureaus use a system called a credit score, which is calculated on certain factors, such as length of time that accounts were open, current balances, payment history and number of recent inquiries.
Whenever an request is made to a credit bureau to obtain an individual's credit record, it is registered as an "inquiry", called a "pull".
Certain requests, such as you checking your own record, or a credit card company with which you already have a relationship checking to see if you qualify for other products from them, generates a "soft pull", which does not lower your credit score.
However, when you apply for credit, whether you are approved or not, a "hard pull" is made, and this type of inquiry lowers your score by a few points.
The reason for this is that if someone is seeking credit from multiple sources, they may be in trouble financially, therefore posing a greater risk of loss.
The points deducted during an inquiry will typically be gained back within a few months, assuming that you used your credit in a wise manner and have made payments on time.
You should carefully reflect before applying for any type of credit, such as credit cards, department store cards, or auto financing, in order to determine whether you actually need the credit product you are applying for.
The question of whether applying for a credit card can actually hurt your credit rating is a very valid one.
In a nutshell, the answer is yes.
Credit bureaus use a system called a credit score, which is calculated on certain factors, such as length of time that accounts were open, current balances, payment history and number of recent inquiries.
Whenever an request is made to a credit bureau to obtain an individual's credit record, it is registered as an "inquiry", called a "pull".
Certain requests, such as you checking your own record, or a credit card company with which you already have a relationship checking to see if you qualify for other products from them, generates a "soft pull", which does not lower your credit score.
However, when you apply for credit, whether you are approved or not, a "hard pull" is made, and this type of inquiry lowers your score by a few points.
The reason for this is that if someone is seeking credit from multiple sources, they may be in trouble financially, therefore posing a greater risk of loss.
The points deducted during an inquiry will typically be gained back within a few months, assuming that you used your credit in a wise manner and have made payments on time.
You should carefully reflect before applying for any type of credit, such as credit cards, department store cards, or auto financing, in order to determine whether you actually need the credit product you are applying for.
