Brian63
Veteran Member
- Joined
- Jan 8, 2001
- Messages
- 1,639
- Location
- Michigan
- Gender
- Male
- Basic Beliefs
- Freethinker/atheist/humanist
Recently I checked my bank which provides a weekly update on my credit score. Also, it provides some brief info and even tips on how to improve credit. Two factors in particular have me curious:
1. Having hard inquiries, in-depth assessments, tends to be a drag on your credit and reduces your score. Your credit looks better to potential lenders if they see that you are not shopping around to a lot of places, because it can come off as you looking desperate for money and that raises warning flags for them.
2. Having a low balance on your accounts compared to what is available for you to use is a positive marker on your credit. If you have a credit card with a cap of $5,000 and you consistently maintain a low balance on it (all else being equal), then potential lenders see that as a safe and good mark on you.
Given those two characteristics, wouldn't it make sense that if a person is at a point in life where they are in good financial shape with a high enough and steady enough income, high assets over liabilities, etc. that they would go ahead and apply for more credit cards? Take a small and temporary hit by the hard inquiries on your credit, which will bring down your score. If you successfully obtain a new card with a high limit and you keep your balance low, that in turn will raise your credit score. Which force is more powerful? Which offsets the other to a greater extent?
Someone recently advised me that it is best to not apply for credit when you do not need to. I made the above rebuttal about how having another account with a low balance and a high limit would offset the hard inquiry that harms your credit. She began to have second thoughts. Neither of us are financial or credit experts, however. Does anyone know?
1. Having hard inquiries, in-depth assessments, tends to be a drag on your credit and reduces your score. Your credit looks better to potential lenders if they see that you are not shopping around to a lot of places, because it can come off as you looking desperate for money and that raises warning flags for them.
2. Having a low balance on your accounts compared to what is available for you to use is a positive marker on your credit. If you have a credit card with a cap of $5,000 and you consistently maintain a low balance on it (all else being equal), then potential lenders see that as a safe and good mark on you.
Given those two characteristics, wouldn't it make sense that if a person is at a point in life where they are in good financial shape with a high enough and steady enough income, high assets over liabilities, etc. that they would go ahead and apply for more credit cards? Take a small and temporary hit by the hard inquiries on your credit, which will bring down your score. If you successfully obtain a new card with a high limit and you keep your balance low, that in turn will raise your credit score. Which force is more powerful? Which offsets the other to a greater extent?
Someone recently advised me that it is best to not apply for credit when you do not need to. I made the above rebuttal about how having another account with a low balance and a high limit would offset the hard inquiry that harms your credit. She began to have second thoughts. Neither of us are financial or credit experts, however. Does anyone know?