3 Signs It's a Bad Time to Open a New Credit Card

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KEY POINTS

  • Opening a new credit card can have benefits, like getting a sign-up bonus.
  • But you may want to hold off if you've opened a lot of cards lately or are planning on getting another type of loan soon.


Don't open a new credit card if doing so could backfire on you.

There's good reason to open new credit cards periodically. You can sign up for a card that better matches your spending or offers cardholder perks you don't currently have. Or you may opt to sign up because of a new cardmember bonus, which can reward you with free money, merchandise, or travel if you fulfill certain requirements.

But while opening a new credit card can often be the right financial move, there are some circumstances where you'd want to steer clear of taking this step. Here are three signs that suggest now's not the right time to apply for new credit.

1. You've opened a lot of cards in the last year

If you've opened several credit cards within the past year or two, this is a good sign you should probably wait a while before signing up for another one.

Some creditors may decline your application for new credit if you've opened too many cards recently. Even if you do get approved, your credit score could take a hit if you have too many inquiries on your credit record in too short a time.

Creditors place hard inquiries on your report when your credit is checked, and those inquiries remain on your record for two years. And too many inquiries can reduce your score.

Average age of credit is also a factor when your score is calculated. Lenders like to see a longer average because it suggests you've been reliably paying your bills for a long time and aren't running up a bunch of new debt you can't pay back. But when you open a new card, your average age of credit goes down.

2. You don't have your spending under your control

If you're worried you won't be able to control how much you charge on a new card, it's usually best not to open one. It's easy to fall into the trap of acquiring high-interest debt that you can't repay right away.

When you get ready to open a new card, it's a good idea to have a detailed budget to track your spending -- and to guide you to pay off anything you charge before interest is due. Otherwise, the interest costs on most credit cards will dwarf the value of any membership rewards, cardholder perks, or new cardmember bonuses you earn.

3. You'll be taking out a large loan soon

Because getting a new credit card can reduce your credit score -- at least temporarily -- it can adversely affect your ability to qualify for other types of loans at affordable rates. Taking on more debt can also make lenders nervous you're getting in over your head.

Large loans such as mortgages and car loans can become much more expensive if you see even a slight increase in interest rate due to a recently opened credit card. It's often not worth taking this hit, especially if you can wait until after you've taken out the big loan to open a new card.

If any of these signs apply to you, putting off opening a new card is likely the best financial choice you could make.

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