A Store Credit Card Application Could Damage Your Credit Score
Will a store credit card application damage your credit score? Yes and no — it depends in good part on your timing.
Yes, it hurts your credit score if you've submitted other credit applications in the recent past. To Equifax, Experian and TransUnion — the three main credit bureaus in the U.S. — as well as potential lenders, applying for lots of credit cards in a brief period of time is viewed as desperation. Trying to open several lines of credit in the span of a few days or weeks makes them think that you've been turned down for credit and you're scrambling to find another source.
No, a merchant credit card application really won't hurt your credit score if it's been weeks or months since the last time you applied for credit. If you wisely wait a few weeks or months between submitting credit applications, your credit score might take a very small hit. However, if your score is already good or better, the hit you take will be very minor and nothing to worry about.
It's helpful to remember that lenders are for-profit enterprises, and if your credit score is good, they'll still extend credit to you — reluctantly — in the hopes of making money from your account. However, they avoid risk like it's an infectious disease, and when someone applies for a store credit card, car loan, cellphone account, or any other line of credit in a short period, it often means one of two things to them:
- You're desperate to get anyone to extend credit to you; or
- You're the victim of identity theft, and the thief is trying to open as many credit lines as possible to defraud the lender and put you in heaps of trouble.
It's also helpful to remember that new credit applications comprise 10 percent of your total credit score. That's not a big chunk, but when it comes to your credit score, every little bit helps. Within that 10 percent, the following credit items are taken into consideration:
- How long it's been since the last credit inquiry on your name
- The time since recent openings of new credit accounts by type
- The number of recent credit inquiries (like your store credit card)
- The number of recently opened lines of credit, proportion of new accounts to total number of accounts, and type of credit account
Therefore, a store credit card application can hurt your credit score either a tiny bit or more substantially. It depends on your current credit score, your credit management, and your timing. If you have a very good credit score and you happen to open two new lines of credit in a short period of time, don't sweat it. Your credit score can handle a slight dip. Nevertheless, if your credit score could use some polish, it may take a bigger hit in the same circumstances. At the same time, these new lines of credit could eventually help your credit score if you pay your bills on time and keep your balances low. It's all about how well you handle your credit behavior, including your store credit cards.
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