Americans have paid off billions in credit card debt during the pandemic, with balances down 17% in the first quarter of 2021 from a year earlier, according to the Federal Reserve Bank of New York. But now that the economy is recovering, credit card issuers are eager to entice applicants with offers and sign-up bonuses.
For example, the Chase Sapphire Preferred Visa and the American Express Platinum card offer up to 100,000 bonus points to new cardholders. While you may be inclined to take advantage of these offers, some short-term credit decisions could damage your credit score in the long run.
Whether you are applying for credit for the first time or have an established credit history, it’s important to consider how new lines of credit might affect your ability to get credit later. If you already have a credit history, your biggest consideration is timing. Applying for a credit card will trigger a “full investigation” of your credit report, and each investigation may result in a two to five point deduction from your credit score. For this reason, if you are applying for a car loan or mortgage, put credit card applications on hold to get the lowest possible interest rates.
Experts recommend avoiding re-applications for at least six months before applying for a mortgage. Credit expert John Ulzheimer, author of the “Smart Consumer’s Guide to Good Credit”, goes so far as to suggest a year of “credit downtime”.