Credit Cards

3 signs that it’s a bad time to open a new credit card

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Don’t open a new credit card if doing so could backfire on you.

Key points

  • Opening a new credit card can have benefits, like getting a sign-up bonus.
  • But you may want to wait if you’ve opened a lot of cards lately or are planning to get another type of loan soon.

There are good reasons to open new credit cards periodically. You can sign up for a card that better fits your spending or offers cardholder benefits you don’t currently have. Or you may choose to sign up because of a new cardmember bonus, which can reward you with free money, merchandise or travel if you meet certain requirements.

But while opening a new credit card can often be the right financial move, there are some circumstances where you’ll want to avoid taking this step. Here are three signs that suggest now is not the right time to apply for new credit.

1. You have opened many cards in the last year

If you’ve opened multiple credit cards in the last year or two, this is a good sign that you should probably wait a while before signing up for another one.

Some creditors may reject your application for new credit if you’ve recently opened too many cards. Even if you get approved, your credit score could suffer if you have too many inquiries on your credit file in too short a time.

Creditors make strict inquiries on your report when your credit is checked, and those inquiries remain on your record for two years. And too many queries can lower your score.

Average credit age is also a factor when calculating your score. Lenders like to see a longer average because it suggests you’ve been reliably paying your bills for a long time and aren’t racking up a lot of new debt that you can’t pay. But when you open a new card, your average credit age goes down.

2. You do not have your expenses under your control

If you’re worried you won’t be able to control how much you charge on a new card, it’s usually best not to open one. It’s easy to fall into the trap of taking on high-interest debt that you can’t pay right away.

When you’re getting ready to open a new card, it’s a good idea to have a detailed budget to track your spending and to guide you in paying off everything you charge before interest is due. Otherwise, the interest costs on most credit cards will dwarf the value of any membership rewards, cardholder perks or new cardholder bonuses you earn.

3. You will soon take out a large loan

Because getting a new credit card can lower your credit score, at least temporarily, it can negatively affect your ability to qualify for other types of loans at affordable rates. Borrowing more can also make lenders nervous that you’re going overboard.

Large loans, like mortgages and auto loans, can get much more expensive if you see even a slight increase in interest rate due to a recently opened credit card. It’s often not worth taking this hit, especially if you can wait until after you’ve taken out the big loan to open a new card.

If any of these signs apply to you, postponing opening a new card is probably the best financial choice you could make.

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