Can opening a store credit card lower my FICO score?
I have a pretty high FICO score (750) and am seeking to increase it. I was about to open a Banana Republic card to save about $100 today. I already have 4 credit cards with a home mortgage that I'm paying each month. I have no other loans or lines of credit open. I've heard from guys like Clark Howard that opening instant credit cards at stores hurts your credit. My question is would instantly opening this card drop my credit score by 10 or 20 points? I'm trying to achieve a near perfect score so I'm concerned that doing things like this will hurt my credit.
Public Comments
- It might, depends on some other factors like how much established credit you have, how long your established accounts have been open, what is the maximum amount you have available to you on any given account. If you're in the mid to high 700's it's pretty much the same thing as being in the 800's. Chill out and focus on keeping your score where it is rather than increasing it. Good Luck
- Clark Howard is wonderful and I have listened to him in Atlanta since the 80's. I look at his website weekly as well. I was a mortgage broker for five years and read many credit reports. The three credit reporting agencies will only tell you their computers generate the credit rating based on a number of factors. I have directed many on improving their credit and/or allowing them to purchase a home. In doing so I created a "grid" outlining the effect in scoring compared to a number of actions. Interesting was the percentage of money owed compared to actual high credit limit. No matter if your high credit limit was $100 or $10,000 the percentage owed determined the "hit" on scores. If you owed 95% of the high credit limit this reduced your score 22 to 28 points, 90% approximately 18 to 20. There was always a significant reduction until you were under 80% owed of high credit. This point reduction was per account. When a store opens an instant line of credit it does so as a very low risk to them. In other words, it will initially open with a $300 limit and with the incentives for purchasing that day most will run that balance at or near the high credit limit. Therefore, the percentage to the high credit limit effects the score.
- No your score will only drop about 5 points, and will go back up again in 6 months. Unless you're about to apply for a loan or something, the $100 is probably worth it. Also isn't "trying to achieve a near perfect score" kind of vain?
