Why applying for the wrong credit cards can make bad credit worse
If you have bad credit, figuring out which credit cards are right for someone with a credit history like yours is especially important. That鈥檚 because applying for the wrong cards and getting turned down can damage your credit even further, making it even harder to qualify for any card at all.
We鈥檒l take a look at why applying for a lot of credit cards in a short time is bad for your credit, and what you should do instead.
How too many applications can hurt you
In most situations, persistence is rewarded. You might think you should respond to a credit card denial by filling out another application or three. But that鈥檚 the last thing you should do.
A聽flurry of credit card applications can damage your creditworthiness in a couple of ways.
First, each聽time you apply for a credit card, or any other line of credit, the lender will check your credit history. That聽聽shows up on your credit history, and each one knocks a few points off your score. If your credit is good, losing a few points temporarily isn鈥檛 a big deal. But if your credit score is already low, dropping it a few more points can be painful. If you apply for several cards in a row, the damage to your score can really add up.
The other way it can聽damage your credit is a bit harder to quantify. Credit card issuers and other prospective lenders don鈥檛 look just at your聽credit scores; they look at your聽full credit history. They want to know things like what聽kinds of loans you鈥檝e taken out and how well you鈥檝e managed debt. They also want to know who else you鈥檝e asked聽for credit聽recently. Seeing that you asked five or six other banks for a credit card in the past six months, without successfully opening a new account with any of them, is going to give them pause.
The right way to respond to聽rejection
When聽you鈥檝e been turned down for a credit card, you might not be very interested in talking to the company that denied you. But it鈥檚 important to find out聽why it turned you聽down. Maybe it was because of your income, and you can apply again once聽your work situation has improved. Maybe it was because of your credit scores, but perhaps the issuer has another credit card聽designed for聽people in exactly your situation.
Credit card issuers are required to send you an 鈥渁dverse action notice,鈥� explaining why they turned you down. Keep an eye on聽your inbox and your physical mailbox after you apply, but also be prepared to call them up and ask them to explain anything that doesn鈥檛 make sense to you.聽It鈥檚 possible that you were denied because of a misunderstanding, or because you or the person who processed your application entered some of your information incorrectly. If that鈥檚 the case, correcting the error may persuade the bank to accept your聽application after all.
Find a good credit card for bad credit
In many cases, applicants are denied because they鈥檝e applied for the wrong card. Some cards are available only to people with good or excellent credit. That鈥檚 something to aspire to聽鈥� once you rebuild your credit. For now, if you have bad credit, you should聽focus on聽.
Your best bet may be a聽. With these cards,聽you put down a security deposit, and you鈥檙e given a line of credit that鈥檚 usually equal to the deposit. Look for one with low fees, and make sure the one you choose reports account activity to the credit bureaus. That way, your good behavior聽will actually result in improved credit.
Virginia C. McGuire is a staff writer at聽NerdWallet, a personal finance website. Email:聽virginia@. Twitter:聽.
This story originally appeared on .
