When shopping for a new credit line, you want to ensure that your credit score is at its possible best. There are several ways to ensure that your credit score remains low while shopping for a new credit line. A line of credit allows you to borrow money for a lender up to a certain amount that you have both agreed on. Credit inquiries from potential lenders may affect your score if they register as a hard inquiry every time you shop for credits. To keep your credit score favourable while shopping for credit, we suggest you do the following:
Keep your credit balances low:
To keep your balances low, you will have to monitor your utilization rate. Your utilization rate can badly affect your credit score, especially when you are shopping for credit. When your balances on revolving accounts are low, your utilization rates will also be low. That leaves a good impression on your credit report, and you stand a better chance to shop for credit and keep your credit score favourable.
Make your payments on time:
To keep your credit score favourable while you shop, make sure that your payments on old credit accounts are made on time. Your payment histories have a significant effect on your credit score. Ensure that all your payments are made on time and that you are up to date with your payments and any past due accounts. Late payments on your credit report present you as a high-risk borrower, and lenders would generally increase your interest rate due to the level of risk you pose.
Limit how often you apply for new credit:
Credit applications can affect your credit score, especially if you make hard inquiries frequently. Although one application may not hurt your score, if they are done too many times, the compilation of those inquiries can damage your score. Rate shopping for a specific type of loan is not considered risky behaviour and may not affect your score. CreditGurus pre-qualification also does not affect your credit score.
Shop for credit around the same time:
To maintain a favourable credit score, shop for credit around the same time. Suppose multiple inquiries or rate shopping credit applications happen within a couple of weeks. In that case, some credit scoring models may ignore the inquiries or register all the inquiries as one hard inquiry rather than multiple hard inquiries. That helps you keep a favourable score and reduces the effect of an inquiry on your overall credit report.
If your credit score is bad, shopping for a new line of credit may be difficult. Credit karma suggests that you find alternatives such as personal loans, peer-to-peer lenders, and credit cards with low APR. You may also want to check with several different lenders and see the one that’s most favourable to you in terms of rates and loan terms. All these will help you manage your finances better while you work on improving your credit score.