How Getting a New Credit Card Can Actually Be Good for Your Credit

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Is opening a first or new credit card bad for your credit?

You may think it is--and, in some cases, that's true--but in just as many cases, getting a new card can actually be beneficial for building up your credit history and aiming toward a better score.

Learn how adding a new credit card could help, and how it could hurt.


Why You Should Open a Credit Card Account

Know that any hard inquiry will drop your score a little bit--so applying for a card will knock you down a few points. But, those blemishes tend to drop off faster than you might think, so this isn't a deal-breaker. What a new account can do, though, is increase the total number of accounts in your name (your credit score likes to see a healthy variety, but not too many) and increase your total credit limit, which in turn can lower your credit utilization ratio--which is a very good thing.


Is It Right for Me?

If you currently have a card that doesn't offer cashback, points, or air mileage incentives, then applying for a better card with those benefits could be a good move. When you open the new card, you could strictly use the old card for small, recurring payments that you pay off right after they're charged (think Netflix/Hulu or music-streaming app charges), and use the new card for most of your charges. Just like that, you're making consistent and on-time payments, and keeping your utilization low.

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Why You Shouldn't Open a Credit Card Account

As mentioned above, a new account means that your current score will take a small hit--if you can't afford even a small hit right now, don't take the chance. A new credit card will also mean that the average age of your accounts is lowered. If you have very few accounts currently, or you've opened a variety of accounts within the last year or two, then taking on another credit card might skew your credit score too far into the low numbers.


What Should I Do?

There are a lot of other options for building or repairing your credit history that don't rely on plastic, including saver loans. If you need the convenience and versatility of a credit card, but know that opening your own won't be the right choice for your score, you could ask a trusted friend or a partner to add you as an authorized user. You could also look into secured credit cards:


Why You Should Consider a Secured Credit Card

There is a neat option for drivers in the St. Louis area who want to try their hand at managing a credit card, but don't want to dive right in (or who may not qualify for a credit card right now): secured credit cards. They work just like a normal card--you can make purchases and pay the bill every month--but with one important caveat: you need to put down cold, hard cash to open a secured card, and that cash down payment determines your credit limit. This ensures that even if you max out the card one month and can't pay it, you have the full amount ready to back you up.


Is It Right for Me?

Since you're essentially funding your own line of credit, a secured credit card can be a much easier option to qualify for than a conventional card, and it comes with a lot less risk, because you'll always be able to fall back on the cash that you provided to pay the full amount. This is a pretty simple and effective way to get practice at using and paying a card without getting into any bad habits.


Want to know more about how things like a secured credit card can help you out?

See our Tips to Build Up Your Credit History to bulk up your knowledge about credit and how it works.


Categories: Credit Tips