However, the problem with your credit is not limited to retail cards. The reason for the decrease in your credit score is because your recent behavior includes activity that lenders consider to be a red flag. The following areas of your credit score are affected by opening too many new accounts:
1. New Credit. New credit accounts for approximately 10% of your credit score. Having too many inquiries and too many new accounts adversely affects this aspect of your credit score. The impact will be greater for consumers with shorter credit histories.
2. Length of Credit History. Length of credit history makes up about 15% of your credit score. Opening too many new accounts at once will lower your overall account age, which negatively impacts this factor.
Although it will take some time, your credit score will recover as long as you begin managing your credit more carefully. Remember to keep applications for new credit to a minimum and only apply for accounts you need and to plan to use. This does not mean that you have to swear off retail card accounts forever. But, in the future, use these tips when considering a new retail credit card:
1. Limit yourself to retail cards with stores where you frequently shop.
2. Only consider retails cards that offer ongoing accountholder discounts as opposed to only offering a discount for the initial purchase.
3. Always pay in full. Retail credit cards typically have high APRs that will offset any discounts you receive if you carry a balance.
For more information, check out our article on Retail Credit Cards.
- If my debt has passed the statute of limitations in my state, how do I get the debt off my credit report?
- I have four retail cards and a good credit score. I want to get a regular credit card and get rid of the retail cards. Is this a good move for my credit?
- I have a credit score of 635, and I'm self-employed. Does this hurt my ability to get a credit card?