Credit Card Incentives Still Hurting Consumer Credit Scores

Posted by Caitlin Tepper | Posted in Debt Advisor | Posted on 18-01-2012

Consider the last time you signed up for a new credit card. If one of the reasons the card became attractive to you was because of additional incentives, you’ll need to realize the impact your decisions may be having on your credit score.

While the credit card industry has changed quite a bit in recent years, card companies are still willing to do what it takes to draw people in the door. Using rewards programs like free double airline miles or product giveaways at mall kiosks, credit card companies are still attracting the attention of consumers – some of whom should not be applying for any lines of new credit.

Personal financial experts tell consumers to pay careful attention to credit card offers. If your credit score is not in a good place and you apply for a credit card or two, you are actually going to trigger a decrease in the credit score you maintain. This low score indicates to lenders that you are a potential risk and limits your ability to be approved for a line of credit.

New warnings are being issued to consumers who are looking to utilize credit cards to their advantage in order to increase existing credit scores. It is important to first work to repair credit before submitting the application. Otherwise, consumers risk dragging down their credit scores even further with new credit inquiries.

Ideally, using a credit card to benefit your credit score requires a consideration of the amount of credit you are using in relationship to the total amount of credit you have. Small purchases with a full payoff each month will help boost low credit scores. On the reverse side, a new credit card can obliterate credit scores if they are used to excess and balances are carried over each month.

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