Question: I have bad credit -Should I apply for a credit card this holiday season?

Should I Apply for a Credit Card If I Have Bad Credit?

The holiday season is upon us and that means retailers are bombarding us with offers of store credit cards with tempting benefits like exclusive discounts and zero percent financing. But what if you have bad credit? Is it worth applying for a credit card, even if you’re unlikely to be approved? Let’s take a look at the pros and cons.

The Pros of Applying for a Credit Card with Bad Credit

1. You May Be Approved: While it’s true that your chances of being approved for a credit card are lower if you have bad credit, it’s not impossible. If you have bad credit, you may still be able to get approved for a secured credit card. With a secured credit card, you put down a cash deposit that becomes your credit limit. So, if you’re looking to rebuild your credit, a secured credit card may be a good option.

2. It Could Help Your Credit Score: Believe it or not, applying for a credit card can actually help your credit score—even if you’re not approved. That’s because when you apply for a credit card, the issuer will do a hard inquiry on your credit report. A hard inquiry is when a lender checks your report to see if you’re eligible for a loan or line of credit. Hard inquiries can temporarily ding your score by a few points, but they also show that you’re actively trying to improve your credit. And that can help improve your score over time.

The Cons of Applying for a Credit Card with Bad Credit

1. You May Not Be Approved: The most obvious downside to applying for a credit card with bad credit is that there’s a good chance you won’t be approved—and that can further damage your score. Every time you apply for new credit and are denied, it shows up as an inquiry on your report and can cause your score to drop even lower. So, if you’re not confident in your chances of being approved, it may be best to hold off on applying until you’ve had time to improve your credit score.

2. You Could End Up Paying More in Interest and Fees: Another downside to having bad credit is that if you are approved for a card, you’ll likely end up paying more in interest and fees than someone with good or excellent credit would pay. That’s because issuers view people with bad credit as higher-risk borrowers, so they charge higher interest rates and fees to offset that risk. So, if you do end up being approved for a new credit card, make sure to read the fine print carefully so you know exactly what fees and interest rates you’ll be paying before agreeing to open the account.

Applying for a new credit card this holiday season may not be the best idea if you have bad credit—but there are some potential benefits to consider as well. Just make sure you weigh the pros and cons carefully before making any decisions so you know what’s best for your financial situation.

 

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Note: The information on this website is for general purposes only and does not constitute financial or legal advice.