Signing up for a new department store credit card to get an additional 30 percent off your purchase may seem like a savvy decision, but consider how opening that line of credit will impact your credit report and credit score. Whenever you consider taking on new lines of credit or loans: Be strategic.
Unnecessary credit accounts could lead to greater debt and adversely impact your credit standing. Every time you apply for new credit a hard inquiry is placed on your credit report, which may cause your score to drop slightly. New accounts and applications for credit can have a negative impact on your credit score because lenders want to ensure you can afford to repay your debts.
Avoid overextending your finances. If you get into a place where you have taken on too much debt and are living beyond your means, eventually your credit score could be ruined by failure to pay on one of your accounts. With any transaction that represents new debt, try to be honest with yourself about the burden. Will you truly be able to fulfill your financial responsibility?
Be wary of racking up debt on your credit cards or adding to your overall debt in any way, as it represents a greater risk in the eyes of lenders and thus can negatively affect your credit score. If it’s your spending that’s the problem try putting safeguards in place, such as paying for purchases in cash. Consider this: The results of a study conducted by the Journal of Experimental Psychology: Applied, reveals buyers who see the money leaving their wallets are less likely to overspend on items they don’t need.
Taking on some debt and managing the payments responsibly helps build a solid credit history and does make you more attractive to lenders. Before you take on additional debt, take a second to think about how you will pay it off and whether it will help or hurt your credit score.