So you’ve been paying off debt and or kept your re-builder credit card in excellent standing. Now the Credit card pre-approval letters start rolling in. One of the joys of getting your finances in order is becoming wanted. Desired by lending institutions who previously wouldn’t have touched you with a rusty analog TV antenna.
Those credit card companies that used to turn their nose up at you will eventually notice your efforts and will begin sending you unsolicited Pre-Approvals for their card. But hold your horses.
As you know inquiries can affect your credit score. There is much debate over how much they can affect your score but trust me, they will. I saw a 15 point drop in my score after going on application binge. (Inquiries affect your score for 1 year.)
When it comes to how many card you should have, this is personal choice but I recommend no more than 3. Your re-builder card ( see reasons why you shouldn’t close this card) , a store card, and a premium card with worthwhile rewards ( BOA Cash Back, Capital One Cash Rewards, AMEX Delta, etc)
Before you take an inquiry hit research these facts about the new card offer:
1. Do you need it? Truthfully you don’t need a credit card, but they are easy ways to rebuild your credit. Don’t get sucked into applying for cards just because you can.
2. Is there an annual fee?If so, what is it? A card with a $300 limit and an $89 annual is a no- no. Re-builder cards are notorious for being predatory. All of them aren’t bad, but there are more bad options than good.
3. What is the APR (annual Percentage rate)? 0% is best. Between 1%-15% is still good, but anything over 23%, is pretty much undesirable and reallly expensive if you have a balance.
4. Are there benefits to having the card such as reward points, price protection, no international fees, extended warranties?
5. Research the limits the card generally issues to keep your debt to income ratio happy. I personally will not apply for a card that issues under $1,000.
6. Other’s experiences. Google search the card with the word “review” behind the name. While everyone can have a different experience with card companies, it’s important to know what people are saying. Does the customer service suck? Is the company terrible at issuing credit line increases? Are the rewards damn near impossible to redeem?
These are the things I consider most important when considering a new card.Think I left something off? Feel free to share.