Department store credit cards can often have a misleading reputation for lowering your credit score. But as with many things in life it comes down to how you use them, so if you already have one, don’t rush to cancel it.
Having a credit card shouldn’t destroy your credit because it can increase your available credit ratio (the amount of credit you use to how much is left unused) if you keep your balance low. However, there are other things to consider before applying for one.
When the store pulls your credit report to evaluate you as a prospective card holder, the action is reported to the credit bureau and tracked as an inquiry. If you’ve racked up several inquiries recently, another inquiry could lower your score. Furthermore, if you have trouble balancing your payments, it could also impact your credit score.
Additionally, store cards typically have lower credit limits, so using them may affect your utilization ratio. If possible, try to not carry a balance at all, and make your payments on time. If the retail card doesnt offer any incentives for using their line credit, and you have the cash on hand, it might be better to pay with cash than with credit.
When seeking new credit,its always good to consider the interest rate offered as well as reward programs but its most important to consider how it will influence your overall credit health.
About the Author
Mark Kennan is a freelance writer specializing in finance-related topics. He has worked as a sports editor and published articles on a number of online outlets.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc. © 2014 ConsumerInfo.com, Inc. All rights reserved.