Rebuilding your credit takes time. Now that you’re finally on the road to recovering your good credit, the last thing you want to do is jeopardize the progress you’ve already made.
That’s why it’s important to think carefully before you apply for a good credit credit card before it’s time.
When you apply for a new card, the card issuer checks your credit, creating what’s called a credit pull or an inquiry on your account. Although it’s been estimated that each inquiry causes your precious score to slip by fewer than 5 points, the Fair Isaac Corporation (FICO) says, “Inquiries can have a greater impact if you have few accounts or a short credit history.” If you’re trying to build up to having good credit, that probably means you
It’s also a good rule of thumb not to apply for any credit cards unless you really need them. The more accounts you have, the harder it is to keep track of when the bills are due, and nothing hurts your credit like paying late. In fact, your payment history accounts for about a third of your overall score.
The good news is that you may not need to wait until you have good credit to get an unsecured card. While most bad credit credit cards do require a deposit, there are many credit cards for people with fair credit that don’t.
And how will you know when it’s time to apply for an unsecured card? Keep an eye on your credit score. Anything below 630 is considered bad credit, so you only need to inch above that mark to be in fair credit, or average credit, territory.
When you are ready to apply, use a credit card tool to compare offers so you’re not applying for cards willy-nilly. Remember, each application dings your credit slightly, and card issuers will be wary if you have six or more inquiries in a short period of time. A low interest rate is crucial if you expect to carry a balance. If you pay your card off every month, low annual fees and juicy rewards might be more important.
When you do manage to get an unsecured card, you shouldn’t necessarily close your old secured credit card. The more long-term accounts you have, the better for your credit score. But if your secured cards are costing you money in annual fees or you need the deposit back, it may not be worth keeping them open.
Let’s face it: We all want the low fees, rock-bottom interest rates, and rewards that are available to people with good credit. But paying your balances on time, keeping your balances low compared with your available credit and waiting for the average age of your credit accounts to inch upward — those are the things that will make the best credit cards available to you. Applying for good credit credit cards too soon will not help you reach your goal any faster.
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