Applied for a card - now what happens?

All about Discover & Diners Club - talk about their credit card deals such as the More, Miles, Escape, and others.
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Jayson
 
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Joined: Wed Feb 26, 2014 7:09 am
Location: Ohio

Applied for a card - now what happens?

Postby Jayson » Wed Feb 26, 2014 7:30 am

Hi everyone -

New to the forums, but I like a lot of what I've read, so I wanted to ask a couple of questions. Let me start with some background - I currently only have one Visa Credit Card with a $500 limit. I've had this since I started college. I'm now a couple of years out of college, with a full time salaried job, saving money while paying off student loans. I really don't use that first Visa card very often - a lot of purchases are made in cash or debit card.

I figured it was about time to apply for a new card - something that can earn me some points, cash back, etc. After doing some research, I liked the "it" card and decided to apply. After doing so, I'm worried about a couple things. #1 - my credit score. How does applying for a new card affect my score? Will it go down drastically? Right now, I believe my score is in the 750 range. Will I see negative affects from applying for this card and opening this card? And does this really matter in the long term?

#2 - does applying for the card automatically open the card if I'm approved? Or will the come back with approval and then I need to agree to additional terms before opening the card?

#3 - assuming I'm accepted for the card, I plan to start using it much more often than I use cash. It will probably by my primary payment method. Does switching from rarely using a credit card to using it all the time have any influence (good or bad) on my credit score? I will be paying it off every month.

Thanks for all the help! Sorry that I'm such a forum/credit newbie :oooo


thom02099
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Postby thom02099 » Wed Feb 26, 2014 10:20 am

Jayson wrote:How does applying for a new card affect my score? Will it go down drastically? Right now, I believe my score is in the 750 range. Will I see negative affects from applying for this card and opening this card? And does this really matter in the long term?

#2 - does applying for the card automatically open the card if I'm approved? Or will the come back with approval and then I need to agree to additional terms before opening the card?

#3 - assuming I'm accepted for the card, I plan to start using it much more often than I use cash. It will probably by my primary payment method. Does switching from rarely using a credit card to using it all the time have any influence (good or bad) on my credit score? I will be paying it off every month.


#1 - You might take a slight ding for the inquiry and new TL, but you'll get that back as the account ages, usually within 6 months. So you might drop 10 points but gain 15; you'd net 5 points for the new account.

#2 - When you are approved, the card account is open, unless you cancel it for some reason prior to receiving the card. Once you receive the card, you'll activate it either on line or by calling the number on the sticker on the card. Some folks have reported using the card they receive without activation, that the process is simply a means to acknowledge that the card has been received. I always activate, for what it's worth.

#3 - Smart decision to get away from all cash. Using your credit card responsibly as you described is what builds your credit score. Rare use of a card tells the card issuer(s) nothing about your spend and pay pattern. Spending and PIF for 6 months will show the issuers what your pattern is. It's OK to leave a balance on a card, under 10% is ideal for scoring purposes.
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MrMosby
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Location: Ohio

Postby MrMosby » Wed Feb 26, 2014 1:08 pm

#1 - There will be a small impact from the inquiry, but ultimately if you have $500 in credit only, you'll probably get a bump up from having a lower utilization radio. (% of available credit used).

#2 - Yes, some lenders don't actually "open" the account until the card is activated, but that varies.

#3 - No. Biggest factors in score include On Time Payments, Utilization (the balance your statement has on it is what is reported to the credit agency for utilization), and average age of accounts.
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