…that when you open credit cards at your favorite stores in order to get the discount, you’re hurting your score?
While on a shopping spree, many consumers are tempted by the discounts of 10% or 15% when they open a store credit card. They think they are saving a bundle, but many consumers may be chipping away at their credit score.
For one thing, multiple inquiries from lenders for their credit reports in a short period can trim their score, especially if they don’t have many credit accounts or they have a short credit history. Why? FICO says that people with six or more credit inquiries on their reports in a short period are eight times more likely to declare bankruptcy than those with no inquiries.
What could be more damaging to a score is how much is charged to new cards. If the balances are near the cards’ limits, they will likely increase the credit-utilization ratio — the amount of debt is relative to the credit limits. The higher the ratio, the greater the negative impact on the score. If there is not a lot charged on the cards, if they are paid off quickly and balances are kept low, the score could eventually benefit from the higher credit limits. But in general, credit should be taken sparingly.