When Should I Apply for a Credit Card?
Credit cards are often applied for impulsively or when consumers are in immediate need of a line of credit. People do not realize there actually is a 'right' time to apply for a new credit card. Timing and credit go hand in hand and making a move before the time is right can actually hurt your credit score and your chances of getting approved for the credit card you want.
Credit card use can make or break a credit score. Improper spending, too many cards, maxing out limits, and missing payments can have a serious impact on your financial life. This impact is not just affecting your present finances, it will likely hurt your personal finances for the next seven years.
Why Timing Matters
There are several reasons people apply for a credit card but if those reasons are impulsive ones, you can end up making your financial situation worse. Here are some examples of why timing matters when applying for a new card:
Credit Score Status
If you have not checked in with your credit score or reviewed your credit history before applying for a card, you can't have any idea of where you stand. Even if you think your credit is outstanding, there is a possibility that someone else is using your information for their own gain. If you plan on applying for a card in the near future, you need to order your reports and scores so you'll know what to expect. Additionally, it is important to ensure your score is up to par so you can get your desired credit limit amount.
Thorough Research
When you apply for a new card, you should do so only after checking out all that is available on the market. Too often people will sign applications coming through the mail simply because they are convenient or look good on the surface. Unfortunately, the wrong credit card can end up costing you too much money and compromise your credit rating. It is best to take the time to thoroughly evaluate your options for cards before applying. Compare the offers, terms, incentives, and rates before committing to one card.
Recent Applications
One reason timing of card applications is important is because it is actually a factor in the complex calculation of scores. A consumer credit score will take into account the timeline of your credit application. Those who apply for several credit cards in a short period of time will lower their score and create a red flag for potential lenders who deem too many applications as a risk. If you need to secure more than one credit card, you should wait several months in between. Too many credit inquiries at one time will have a negative effect on your credit score.
Financial Preparedness
Credit cards should never be taken lightly. The only way to ensure you will be able to commit to using credit cards wisely is to be financially prepared beforehand. This means every credit card account holder should have an established budget that outlines how much spending can be done on the card. Too often card holders will overspend simply because they have the credit available to them. Budgeting for expenses is vital to make sure you can afford to pay off the card balance in full each and every month. Without a solid financial plan, balances that are rolled over from one month to the next will mean your credit card will cost you more than you can afford. This can be the start of a vicious debt cycle that is difficult to repair.
The bottom line on credit applications is that it is never wise to apply for a card because you feel like it or because you want one. Take the time to get yourself prepared for the responsibilities that come with credit card use and ownership. When you are financially stable and confident you can utilize credit to improve your finances, only then will it be the right time to consider your options and begin applying for the right card. Review all terms and conditions of cards on the market and select the one that works best with your financial needs and spending habits.
