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Applying for a card? Avoid these credit myths

August 1, 2011 12:00:00 AM PDT
If you feel like you're being inundated with credit-card offers, you're not imagining things. Credit-card companies mailed 1.4 billion offers in the first quarter of 2011, nearly double the same period a year ago. But before you're tempted to sign up, here's some important advice.

Your first inclination may be to toss out that stack of credit-card offers you receive by mail. That would be a mistake: Offers like these should be shredded to avoid identity theft.

Credit-card offers can seem so enticing with zero-percent introductory interest rates, attractive cash-back options and no annual fees. It may seem like the ideal time to get a new credit card, but Consumer Reports Associate Editro Chris Fichera says you should be aware that your credit score can be hurt temporarily when you apply for new cards.

"Each time you apply for a card your credit score can take a hit, and you might not want to risk that if you're applying for a mortgage or other significant loan in the near future," said Fichera.

But if you already have a lot of cards, don't worry. Contrary to popular belief, having several cards may actually help your credit score, if you use them wisely.

"The more credit you have available, the better it is for your credit score. But you still have to keep your spending well under your card limits and keep making your payments on time," said Fichera.

Another common misconception is that you should hold on to your oldest credit card no matter what.

"How long you've had credit does count for 15 percent of your credit score. But even after you ditch a card, it can still count toward your score for as long as 10 years," said Fichera.

So if your overall credit history is healthy, it may be a good time to get rid of your old cards if you don't like their terms.

On new credit-card offers, make sure to check carefully for any fees, like on balance transfers, and make sure you know what the annual-percentage rate will be once the introductory rate expires.

If you do apply for a new card and it affects your credit score, the damage will only last six months, as long as you maintain healthy spending habit.


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