Where did the "apply only for the credit you need" advice come from anyway?

[Anonymous]

I was just wondering where did this seemingly ubiquitous advice of "Only apply for credit you really need" came from? You can find some version of this on basically any advice column, even on this website.

It seems to me that this is not only wrong, it is in fact often the opposite of what one wants to do.

It is not a secret that if you open a few accounts as soon as you can in life (ie before you actually need them), use them but keep balances low, pay them off every month and do CLIs as often as possible (while minimizing HPs for these) you will develop good credit rather easily.
But you could not do this by only applying for credit when you really need it. That would be the equivalent of someone getting just enough credit to charge stuff they need to charge. This would result in a much shorter history, with likely fewer accounts and lower limits than the above strategy.
Thinking only about myself, right now I don't really need credit. All my credit cards exist solely for building credit, building relationships with banks and rewards. If these things weren't a factor, i would be fine charging everything to my debit card (although that would also be less secure).

So, why is this canard so widespread?

[MarineVietVet]

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@Anonymous wrote:

I was just wondering where did this seemingly ubiquitous advice of "Only apply for credit you really need" came from? You can find some version of this on basically any advice column, even on this website.

It seems to me that this is not only wrong, it is in fact often the opposite of what one wants to do.

It is not a secret that if you open a few accounts as soon as you can in life (ie before you actually need them), use them but keep balances low, pay them off every month and do CLIs as often as possible (while minimizing HPs for these) you will develop good credit rather easily.
But you could not do this by only applying for credit when you really need it. That would be the equivalent of someone getting just enough credit to charge stuff they need to charge. This would result in a much shorter history, with likely fewer accounts and lower limits than the above strategy.
Thinking only about myself, right now I don't really need credit. All my credit cards exist solely for building credit, building relationships with banks and rewards. If these things weren't a factor, i would be fine charging everything to my debit card (although that would also be less secure).

So, why is this canard so widespread?

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You make some very valid points but there are far too many people who don't understand credit and the inherent dangers of not managing it correctly.

They apply for credit "because they can" without any thought of the long term consequences. I've been down that road more than once. 

So perhaps that advice might be edited a bit to say "Only apply for credit you need after carefully considering all options and possible negative outcomes".

[Kostya1992]

The underlying assumption is that people can't manage more credit cards then what they actually need. Good advice for people who are irresponsible.

[Anonymous]

I guess because there is a lot of people who are unable to manage such accounts. Ie: I have 7 accounts and unless I'm very organized I could miss payments or lose cards without even noticing. If that's the case then having too many accounts is counterproductive. But I agree, the more credit available and the older your accounts should mean a better credit score.

[coldnmn]

In my opinion applying for credit only when you need it for rewards etc. You have a much better chance of better CLIs and aprs than if for example getting a bunch of toy limit cards and making yourself look desperate for credit. Most forums are full of people that have cards they have no use for and will never use. In your example getting cards to start your credit journey would be an example of a need if you will use them. I as a 63 year old man and applied for Victorias secret just because I can get it not so much.

[Anonymous]

I guess I see what you guys are saying. But are most people that irresponsible as to mismanage a credit card just because they have it? I guess my beef with this is that if someone is reading a credit advice article then they care about their credit. 

So instead of telling those people "don't get any more cards than you need" why not tell them "Get 2-3 cards that you think you will actually use, that do not have annual fees and set them on autopay"

[MarineVietVet]

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@Anonymous wrote:

I guess I see what you guys are saying. But are most people that irresponsible as to mismanage a credit card just because they have it? I guess my beef with this is that if someone is reading a credit advice article then they care about their credit. 

So instead of telling those people "don't get any more cards than you need" why not tell them "Get 2-3 cards that you think you will actually use, that do not have annual fees and set them on autopay"

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I won't use the word"most" but I'm afraid that the thousands of posts here and on other sites asking for suggestions on how to repair and rebuld credit shows just how widespread the problem is.

I think all of that is good advice.

[DeadlyPersona]

I personally think the key word is "responsibility".  In my case, I went from not having any credit to building credit (responsibly) and in the process trying to assist some family members.  However, in the initial conversations I can tell you which family members are ready for credit cards and which ones are not.  I have a particular relative I wouldn't trust with ONE credit card.....she's just not "responsible" at the moment and honestly, I don't think she ever will be.

[takeshi74]

I can't say for certain as I haven't tracked the history of this piece of advice but I'm guessing it's based on the tendency of people to apply and apply even when their credit doesn't support approvals or decent limits/APR/etc which can be detrimental.  It's probably also an overreaction to people who apply for cards based on aesthetics and other such superficial reasons without really looking at the features, benefits, rewards etc and fail to put any real thought into what cards they're applying for (and/or those who apply for every card that has an offer that comes in the mail or via email).  Another case is those merely seeking the thrill of approvals.

With any generalization you have to carefully consider the why behind it and determine if it's applicable to a given situation.

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@Anonymous wrote:

It seems to me that this is not only wrong, it is in fact often the opposite of what one wants to do.

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...and that's just reacting in the opposite direction with another generalization.  The real problem with generalizations is that they're applicable in some cases and not in others yet many assume them to be universally applicable.  In many cases people should only be applying for the credit that they need.  In other cases it's not an issue.  The specifics matter and there's much more to consider than just "what you need".  What doesn't help is that the word "need" is extremely vague.  Does need mean what one can reasonably manage?  Does it mean the amount of one's spend?  Does it mean however much one needs to maintain optimal utilization (which is what I do)?  Does it mean something else entirely?

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@Anonymous wrote:

I guess I see what you guys are saying. But are most people that irresponsible as to mismanage a credit card just because they have it? I guess my beef with this is that if someone is reading a credit advice article then they care about their credit. 

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Care and responsbility are two entirely different things.  Why does one go to a credit site for information on building/rebuilding?  In many cases one hasn't been responsible or knowledgeable in the past.  A lot of users here on myFICO and other credit discussion sites are rebuilding and have bad habits that they need to overcome.  Take a look at threads here and you can see examples of this.  The generalization is targeted towards people like that.  Again, always consider the applicability of a generalization to a specific situation.

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@Anonymous wrote:

So instead of telling those people "don't get any more cards than you need" why not tell them "Get 2-3 cards that you think you will actually use, that do not have annual fees and set them on autopay"

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Because, again, you're just subbing one generalization for another.  Neither being applicable to all situations.  X cards doesn't work for eveyone.  Simply avoiding AF's without any other considerations does not work for everyone.  Autopay does not work for everyone.

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@Anonymous wrote:

So, why is this canard so widespread?

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It's a lot easier to rely on catchphrases than to really understand what's going on.

The real solution is education, not crutches like these generalizations.

[Anonymous]

All very valid points. I currently have way more credit than I need and or will use. With only 2 "real" cards. I eventually want to add a Mastercard, Discover, and Amex to the mix in a couple years once I sit on what I have and these inquires fall off.