topic Re: How opening a new account may help or hurt my credit in Credit Card Applications

How opening a new account may help or hurt my credit

Anonymous — Wed, 10 Jul 2019 05:45:41 GMT

I am working very hard on improving my credit. I have a Cap One Platinum that is has a $5400 balance and $6k limit. I have not charged anything on it in probably a half year and working to just get it paid down. I also have a smaller credit card with smaller limit of $700 and around $500 on it. I also recently financed a car. I have perfect on-time payment history. I have managed to increase my credit score about 80 points or so in the last few months. I'm just shy of 640 right now.

My question is this. Right now it's not possible for me to make higher payments on my two cards than what I am already paying. I already do pay well over the minimum on both, but it's taking such a long time for my credit card debt to go down and showing very little available credit.

I was thinking of applying for a card that does not affect credit to apply, like this one:

https://www.discovercard.com/application/prequal?ekey=&edate=20190707&cmpgnid=em-dcp-ECSP_0901M&uniqueid=&lnk_loc=BODY

with the sole purpose of it reflecting on my credit that I have more available credit compared to debt.

Does opening a new account with credit you don't touch end up balancing things out as far as what's seen as available and not used credit limits?

Re: How opening a new account may help or hurt my credit

Anonymous — Wed, 10 Jul 2019 06:18:45 GMT

@Anonymous wrote:
I am working very hard on improving my credit. I have a Cap One Platinum that is has a $5400 balance and $6k limit. I have not charged anything on it in probably a half year and working to just get it paid down. I also have a smaller credit card with smaller limit of $700 and around $500 on it. I also recently financed a car. I have perfect on-time payment history. I have managed to increase my credit score about 80 points or so in the last few months. I'm just shy of 640 right now.

My question is this. Right now it's not possible for me to make higher payments on my two cards than what I am already paying. I already do pay well over the minimum on both, but it's taking such a long time for my credit card debt to go down and showing very little available credit.

I was thinking of applying for a card that does not affect credit to apply, like this one:

https://www.discovercard.com/application/prequal?ekey=&edate=20190707&cmpgnid=em-dcp-ECSP_0901M&uniqueid=&lnk_loc=BODY

with the sole purpose of it reflecting on my credit that I have more available credit compared to debt.

Does opening a new account with credit you don't touch end up balancing things out as far as what's seen as available and not used credit limits?

I hate to be the bearer of bad news, but your Cap1 card is considered maxed out (utilization is higher than 88.9%) and your smaller card is at 71.4%. With utilization this high & no recent purchase activity I find it very unlikely that you would be able to secure another card at this time that could actually help your utilization.

You need to find a way to create some extra cash flow to throw at paying down your debt. When you get both accounts below 68.9% you’ll see a small bump in scores, and then another when you get them under 48.9%, 28.9%, and finally under 8.9%. Are you using a budget to track all of your spending? You should be using one and tracking every penny you spend. This will help you stick to a plan of paying everything, and maybe also identify spending habits that can be modified to help free up cash flow. GL!

Re: How opening a new account may help or hurt my credit

Anonymous — Wed, 10 Jul 2019 07:32:56 GMT

“I was thinking of applying for a card that does not affect credit to apply, like this one”

No. You are miss understanding what Discover is saying on that page. Checking to see if you prequalify does not affect your credit. But once you apply it WILL affect your credit. (Which is a second step) The inquiry and new account will lower your score. The upside is, if you are approved it could drastically lower your utilization, which will help your score. So the answer to your question about “balancing things out” is; yes. But as Scooter pointed out, it’s a low chance of approval because you are showing at least one maxed out card.

Getting both those cards below 30% will increase your approval chances dramatically. But you need to think about the end goal. You say you’re not going to touch this new credit you are only doing it to help your scores. What is the reason for needing higher scores? Btw I’m not asking you, it’s none of my business. I’m saying you should ask yourself this. You only need scores to apply for things. Your current credit obligations are stretched to the max. You have a debt problem not a score problem. Either settle in for the long slow haul of paying that down or find a way to pay it down faster.

Re: How opening a new account may help or hurt my credit

Anonymous — Wed, 10 Jul 2019 07:52:25 GMT

Thanks for both of your replies. I appreciate the input.

Yes I do use a budgeting tool. I don't do any extra spending now at all, I'm very frugal. I had both cards going very well for a while until my daughter and son in law needed help with an emergency financial situation and I ended up helping them more than I should have which is why the cards ended up so highly utilized.

The reason I am wanting to improve my score is so I can re-finance my auto loan as I am paying way too much interest and also so I can get a lower insurance rate than what I'm paying. My credit was a lot lower score when I financed my car. Also, I've been a freelancer for years, feast or famine, and am interested in a particular job with a company that will likely check my credit, so there's that too.

I keep getting this notification to apply for this Discover card without a ding to my credit so it's tempting to check just for it to help my high utilization, but yeah if even opening the account is going to affect it in ANY way, then I don't want to do that.

Re: How opening a new account may help or hurt my credit

Remedios — Thu, 11 Jul 2019 18:40:53 GMT

@Anonymous wrote:
Thanks for both of your replies. I appreciate the input.

Yes I do use a budgeting tool. I don't do any extra spending now at all, I'm very frugal. I had both cards going very well for a while until my daughter and son in law needed help with an emergency financial situation and I ended up helping them more than I should have which is why the cards ended up so highly utilized.

The reason I am wanting to improve my score is so I can re-finance my auto loan as I am paying way too much interest and also so I can get a lower insurance rate than what I'm paying. My credit was a lot lower score when I financed my car. Also, I've been a freelancer for years, feast or famine, and am interested in a particular job with a company that will likely check my credit, so there's that too.

I keep getting this notification to apply for this Discover card without a ding to my credit so it's tempting to check just for it to help my high utilization, but yeah if even opening the account is going to affect it in ANY way, then I don't want to do that.

@Anonymous Hi and welcome to the forums!

"The ding" to your credit only references pre approval.

It's possible that if you are approved, "the ding" would be smaller than the gain from reducing aggregate utilization and you'd actually see some points gained.

With that said, reducing utilization by opening accounts is just masking the problem unless you're approved and you can do a BT to a new card, then make serious effort to pay it off because just the interest on Cap One card must be making you bleed the money.

Always chose your finances over scoring. I'd give Discover a try, even if it results in denial.

You have a lot to gain by moving some of that balance to 0% promo card if approved.

Good luck!

Re: How opening a new account may help or hurt my credit

Anonymous — Thu, 11 Jul 2019 20:09:06 GMT

Yes, the interest I'm paying on my Cap One is unbelievably high. I make a $250 payment ($60 over the minimum) and only $125 or so affects the balance. That is a great idea to Balance Transfer. Thank you.

Re: How opening a new account may help or hurt my credit

Remedios — Thu, 11 Jul 2019 20:49:12 GMT

@Anonymous wrote:
Yes, the interest I'm paying on my Cap One is unbelievably high. I make a $250 payment ($60 over the minimum) and only $125 or so affects the balance. That is a great idea to Balance Transfer. Thank you.

I would give it a try. Denials are bound to happen to all of us sometimes, but if they say yes, it will be great for you

If you have a pre approval on their website, I'd be all over it BT wise. Also, they have 18 month BT card to give you some more breathing room while saving money

Good luck and I truly hope to see an approval thread from you

Re: How opening a new account may help or hurt my credit

Anonymous — Thu, 11 Jul 2019 20:50:43 GMT

Thank you so much!

Re: How opening a new account may help or hurt my credit

Remedios — Fri, 12 Jul 2019 00:24:00 GMT

You're welcome!

Re: How opening a new account may help or hurt my credit

Anonymous — Fri, 12 Jul 2019 06:24:01 GMT

See if you can get a loan with lending tree or CU with a lower interest rate than your cards. Then pay off your card with the loan. I think an installment loan in your profile will help your score along with 0% utilization.

Re: How opening a new account may help or hurt my credit

jimmy2000 — Fri, 12 Jul 2019 07:16:15 GMT

I am going to be very blunt

You do not need any more cards

You need to pay off your debt

When your debt is paid off

Then we can talk about a new card

Thanks for joining

Re: How opening a new account may help or hurt my credit

TheConstant — Fri, 12 Jul 2019 12:37:15 GMT

1. Product change your Cap1 Plat to a QS - you get 1.5% cash back instead of 0% and every penny helps in your case, if you were to use the card.
2. Your credit should be fine for a job - take a breath, you can do this.
3. Getting another card is NOT a bad idea if it's a balance transfer card. Unfortunately, I think you need about 30 more points to get approved for most of them.
4. A lower APR card for current spending will help a lot - I got an Amex BCE in a similar situation as yours with +10pts, APR of 17% to beat out the Cap1 of 26%. It's worth a shot for Amex when your score hits 650's.

Most importantly,

5. Do NOT spend on your credit cards right now. Only spend on your debit or cash, and pay the cards with what's left. Otherwise, you're compounding the interest into future cash flows, which increases liquidity risk and hurts your ability to pay off in the future.
6. Out of your two cards, pay the minimum on the lower APR card and pay the most you can on the higher APR card. You gain by paying down principal on a higher cost to you.

Question:

Do you have a 401k that allows you to take out a personal loan?

If so, you should leverage it. The interest pays back to yourself and it's going to be about a percent higher than the current prime rate or LIBOR rate which is right now ~6.5%, a significant lower rate than paying the credit card companies.