Retail Store Cards and Your Credit Score

How many of you have ever been tempted to open a store credit card to save 10% on your purchase or get 12 months with no payments? Well, I hope you resisted! Did you know that every time you apply for credit it impacts your credit score and could very likely lower your credit score for the next twelve months. Even one retail card can affect your score in multiple ways!

1) When you fill out that new credit application, you are giving the store's credit card division permission to look at your credit reports. That means that there is an inquiry posted to your account by that retail store when they pull your report to evaluate your credit worthiness. Inquiries stay on your credit report for a year. Inquiries, even one, will negatively impact your score.

2) Adding a new credit card account effectively lowers the average age of all of your cards. This also lowers your credit score.

3) The low credit limit on most retail store revolving accounts also impacts your utilization of credit. If you have a $200 charge on that card and the limit they give you is only $250 you are at 80% utilization on that card. This could have a large negative impact if you are already running above the recommneded 35% utilization rate.

4) If you buy a large ticket item that allows you to make no payments for 12 months, your balance on that card remains static and is not seen as good credit management by creditors. It also increases your utilization ratio, both of which are harmful to your score.

5) If the store credit you receive is with a finance company that is seen as a 'bad' type of credit and decreases your credit score.

If you are already in a high risk category (FICO score under 650) you could be lowering your score even further by applying for a store card that 'saves' you 10% one time. That lower score will impact your ability to get some other type of credit that may be more critical than buying an item on sale. It is something to think about.

Linda Adams The Clean Credit Queen - About the Author:

Linda Adams is an innovative and seasoned facilitator & educator with more than 20 years experience designing and implementing programs for audiences of all ages. She is dedicated to helping others realize how important their credit is to every facet of their lives. You can find more credit education and information at http://www.CleanCreditQueen.com