This article was inspired by my interactions with one of our readers and got me thinking of how card companies mislead people into false hopes which in turn hurts them more – if anybody.
Card companies are but, so what the hell am I talking about you might say?
Well, you’ve all shopped for something at Amazon or Best buy right ? When you’re ready to check-out, there is a tab that shows you the extra money you could save by applying for a member card which could be offered by that company with a Visa or MasterCard partnership.
What they don’t tell you is, everytime you apply for that card, (same applies to any and every card application), and the more times you re-apply if rejected, the more inquiries you rack up.
Here’s an Example for you to consider
You applied for the Amazon Visa card once every week for two months with no approval – that’s at least 9 hard inquiries that your credit report just recorded. This does two things:
1. Potentially could your credit score (while the scoring metrics don’t say this, it still does show up on file)
2. Plants the idea in a card provider’s head that this person is not a reliable/good potential borrower.
Thus unapproving your each application and jeopardizing all your future applications.
Unless you have a well diversified base of multiple sources of loans with on time payments for each over a long period of time, you will be in a situation where it is difficult to recover those points as quick as you lost them.
Only ever apply for a card you want when you are confident you meet all their criteria and know which the highest probability of success you might be approved. There still is always a chance of them rejecting you due to the following reasons:
1. Too many inquiries recently
2. Utilization too high
3. Outstanding debt payments
4. Thin-file (history), not much data in support
5. Surpassed 5/24 rule (Chase)
6. Surpassed 2-3-4 rule (BoA)
So the next time you do want to apply to new credit, know that it affects your score even if you didn’t get approved. If it is a pre-approval offer, chances are they won’t do a hard inquiry and your score will improve than reduce.