When to avoid applying for a credit card

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At 28, Todd Baldwin is a self-made millennial millionaire thanks to his investment in real estate.

But with the six rental properties – worth over $ 4 million – that he currently pays mortgages sure, Baldwin loves his plastic. Today, enthusiasts credit card user has 15 cards to his name.

Credit card registration offers is useful for Baldwin when he knows he has a big expense coming up, like providing one of his properties to list on Airbnb or doing a repair on his auto, a paying 2009 Ford Focus that he shares with his wife. Since he’s doing the spending anyway, he thinks he might as well earn a little rewards for that.

Baldwin typically opens a new credit card every six months, depending on the benefits. “I’m looking for new account bonuses, air miles and cash back,” he says CNBC Select. “I currently have enough kilometers to travel for free to and from Europe. “

Baldwin sticks to recommendations timeline for opening new credit cards, which does not exceed approximately every six months. But while he likes to take advantage of the cards’ generous welcome bonuses, there is a scenario where he refuses to apply for new credit. His steadfast rule is to refrain from doing so while he is in the process of buying real estate because he knows it reduces his credit rating.

How Applying For New Credit Reduces Your Credit Score

Due to the immediate impact on his 3-digit credit score, Baldwin is unlikely to apply for credit a few months before trying to get approval to buy a new property.

“If I think I’m going to apply for a new property within the next 90 days, I won’t be asking for any new credit,” Baldwin said.

This guideline applies to all type of borrower, not only credit card optimizers like Baudouin. Applying for new credit, whether it’s a credit card or a car loan, temporarily loses a few points on your credit score, resulting in a “serious investigation” On your credit report.

When a credit card issuer or lender extracts your credit report from one of the three major credit bureaus (Experiential, Equifax Where TransUnion) to see your credit rating, this is called a serious investigation (or “hard draw”). No matter if you end up being approved or denied for the credit card or the loan, you always have a serious claim on your credit report.

Fortunately, your score can bounce back in a matter of months if you use your card responsibly, like pay your balances on time and in full. And while serious inquiries stay on your credit report for two years, the popular FICO scoring model only considers inquiries from the past 12 months when calculating your credit score, and they only make up 10% of the total. calculation of the FICO score.

The damage is also not significant: according to FICO, a credit check on most people’s credit reports will subtract less than five points from their FICO score.

Learn more: The 5 reasons your credit score might suddenly drop

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Capital One’s CreditWise®

The information on CreditWise has been independently collected by CNBC and has not been reviewed or provided by the company prior to posting.

  • Cost

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  • Dark web analysis

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Experian Dark Web Scan + Credit Monitoring

On the secure Experian site

  • Cost

  • Supervised credit bureaus

  • Credit rating model used

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FICO® Basic, Advanced and Premier

  • Cost

    $ 19.95 to $ 39.95 per month

  • Supervised credit bureaus

    Experian for the Basic plan or Experian, Equifax and TransUnion for the Advanced and Premier plans

  • Credit rating model used

  • Dark web analysis

    Yes, for the Advanced and Premier plans

  • Identity assurance

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

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