It’s understandable to be concerned about your credit score being affected when opening a new credit account. In your research, you probably want to weigh your options to not only compare which account will get you the lowest interest rate for loans (for highest return on savings), but also if opening the account will affect your credit score.
Some people don't realize a problem with their credit score until it's time to apply for a loan. Then, the most recommended way to increase your score is to take out more loans to prove to lenders you’re responsible. But what if you just can't afford to get another loan - then what?
So you’re ready to establish or build your credit score and are looking for ways to do it? In your credit building research, you’ve probably come across the recommendation to open a credit card. On one hand, credit cards can help you build credit, earn rewards and access exclusive benefits, and provide you with extra cash flow when you don’t have the money at your disposal. On the other hand, a credit card could hurt your credit score, your credit history, and your wallet if you used too much of your limit, carry a balance and rack up interest charges, or miss a payment. Since this financial tool comes across as a blessing if used properly and a curse if misused, you may want to avoid credit cards altogether. Luckily, when building credit, it doesn't have to be with a credit card! There are other ways. Via GIPHY I know you want to go about building credit the right way since credit affects your everyday life. While many people are concerned about building credit to have better approval odds on their next loan, having good credit affects more than just future loan rates. Other than acquiring another tradeline, having good credit affects: Where you live: Landlords look at your credit history when you apply. It tells them whether or not you’ll default on paying your rent. Your employment: Some employers (not all) look at your credit to see how you handle large sums of money. Your utility bills: Your utility bills are not loans, but it could affect your credit score should you fail to pay your electricity or gas bill. If you have a bad credit history, you could be required to put down a deposit or have a cosigner set up your utility account. Your auto insurance rate: Auto insurance companies look at your credit history to determine your insurance risk score. So, if you have a good credit score, you could pay less for insurance. Now that you know what a good credit score is good for and how it can affect you, here are some actionable steps to take to boost your credit score without using a credit card.
Short and sweet? Yes, your credit score will decrease when you officially apply for a credit card. But don't worry - The drop is temporary and the score increases after a couple of weeks and the benefits of having a credit card far outweigh the initial drop in score. By that time, you could be using your credit card responsibly where the lender reports your positive credit card activity to the bureau. In turn, that positive activity will boost your credit score even higher