Protect Your Credit Score: 4 Times to Avoid Applying for Credit

There are times when opening a new credit card can be quite beneficial to your overall credit score. If you have a mortgage or car loan, but no credit card, applying for a new card will help to diversify your credit history, which is a good thing. Or, if you have been dutifully paying off a high-interest card, opening a new card after a year is also a great way to build credit. But there are times when you should avoid applying for credit. Here are four to consider.

If You’ve Recently Opened a New Credit Line

When considering your credit score, FICO looks at the average age of your credit cards. If you’ve opened many different credit cards in a short amount of time, that can be perceived as a risk. Take time in between applying for cards so that you can build (rather than hurt) your credit score.

After Shopping Around for Loans

When you are applying for a loan or a new credit card, lending companies perform what is known as a “hard inquiry” on your credit. Too many of these also lower your score. FICO keeps these on file for two years, but only uses the last 12 months to determine your score.

If You’ve Fallen Behind

Before you apply for new credit, make sure you haven’t fallen behind on any other bill payments. Getting a credit card to pay off another is a recipe for credit disaster. Instead, consider a cash-out refinance, a tighter budget, or a second job to pay your debt off before opening new credit.

Your Balance Is Too High

FICO looks as what is called credit utilization when determining your credit score. When you carry too high a balance, your score is negatively impacted. Before applying for new credit, check your credit score and pay down your balance first.

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