How Having Too Many Credit Card Applications Might Backfire On You

Information verified correct on September 28th, 2016
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Filling out credit card applications is something that most of us will do throughout our lives.

Each time we do that the financial institution from whom we are applying will need to look at our credit file. This helps them determine if we are a good investment or a risk. It indicates to them how much they should charge us in interest based on that risk. The two major reporting agencies are Dunn & Bradstreet and Veda Advantage. Typically, the lender will look at reports from one or both of these places.

You might not realise it, but each and every time you submit a request, whether it is approved or not, it is recorded in your file. Should a lender see that you have made several requests it will raise a red flag and could negatively impact your score. Creditors want to do business with people who are not so desperate for money that they are filling out loads of applications. This action makes it seem like you are in some sort of financial trouble or are using the plastic for fraudulent purposes.

Cutting back on credit card applications

The question you are probably asking is how many is too many when it comes to requesting a credit card? There is no solid answer, just common sense about how many pings there may be on your file. Keep in mind that it is not just plastic that is recorded in your report. When you submit other applications like those for a new mobile phone account, for new Internet service, for electricity or other energy services, even for debit cards it will be noted in your file. All of those request can add up very quickly.

Knowing exactly what is in your file requires you to check it on a regular basis. You can request a copy of your report from both of the major reporting agencies at no charge. The only fees that are associated with getting your file are for an instant delivery. As long as you plan ahead, you can check your file at no cost. Doing this allows you to see how much activity is on your file, so you know whether or not you should way to submit any new requests. It is also the smartest way to make sure your personal and financial data has not been stolen. If you see that there are requests or accounts listed on your file that you did not submit, you are probably a victim of fraud.

Getting the right credit card is not as easy as filling out loads of requests and hoping for an approval. Instead, you should do enough research to find the one card that is right for your budget and apply only for it. Should you be declined, you can move on to your second choice. However, if that is also declined you might want to reconsider the type of cards you are applying for and double check that your credit file is in good order.

Guide to ensuring you don’t apply for too many credit cards

The largest credit bureau in Australia, Veda Advantage, says that applying for lots of credit cards is not a good idea. This comes from a study that shows that people who apply for multiple credit cards are more than four times likely to have a problem paying their debt in the following year.

This means that consumers that apply for too many credit cards will be considered a high risk and will be more likely to default on their payments. Australia is not set up with a thorough reporting system yet so card companies do not know whether the applicant went ahead and accepted the credit offers or not.

Every application that you make for credit should be done in a serious manner and should not be taken lightly. You need to take the time to do some research before filling out an application. Are you absolutely certain that the card you are applying for is the one that you want to get? If, and only if, you can answer this question with a positive yes should you go ahead and apply. If you have any doubt, then more research is needed.

Keeping your credit rating high

Since you now know that applying for lots of credit cards is not a good idea, here are three other things you can do to keep your credit rating high.

  • Never miss any of your payments and make sure that you pay your card statement on time. If you fail to do either of these your credit rating will be affected immediately. If you are in a tough financial situation then don’t be afraid to talk to your lenders to find out if there is any way they can give you some help.
  • Do proper research before filling out the application. Look at your budget to determine what kind of card you can afford and don’t apply for lots of credit cards.
  • Check your credit report on a regular basis. It is available at www.mycreditfile.com.au and is kept up to date. You should always be aware of what your credit situation is like at all times.

Even though many people do it, applying for lots of credit cards is not the right choice to make when you want a new card. Make a selective decision about which card you want to apply for and then fill out the application. This will keep your credit report in good shape.

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