Kiplinger’s Personal Finance: Think twice about applying for credit | Business News

Selina Johansson


Credit card issuers are eager to entice new applicants with flashy deals and sign-up bonuses.

Americans paid down billions in credit card debt during the pandemic, with balances declining 17% in the first quarter of 2021 compared with a year earlier, according to the Federal Reserve Bank of New York. But now that the economy is recovering, credit card issuers are eager to entice applicants with deals and sign-up bonuses.

For example, the Chase Sapphire Preferred Visa and the American Express Platinum card are offering up to 100,000 bonus points to new cardholders. While you might be inclined to take advantage of these deals, some short-term credit decisions could lead to long-term damage to your credit score.

Whether you’re applying for credit for the first time or have an established credit history, it’s important to consider how new lines of credit could affect your ability to obtain credit down the road. If you already have a credit history, your biggest consideration is timing. Applying for a credit card will trigger a “hard inquiry” into your credit report, and each inquiry can lead to a two- to five-point deduction in your credit score. For that reason, if you will be applying for an auto loan or mortgage, hold off on credit card applications so you can secure the lowest interest rates possible.

Experts recommend avoiding new applications for at least six months before seeking or a mortgage. Credit expert John Ulzheimer, author of “The Smart Consumer’s Guide to Good Credit,” goes so far as to suggest a year of “credit downtime.”

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