Is Opening a Store Credit Card After Closing a Good Idea?

You just closed on your first home. Congratulations! The excitement is palpable, and now you direct your attention to all the great stuff you need to fill this brand new home of yours. To your surprise, all these offers start coming in for 0% financing on a myriad of different home décor and appliance options. Perfect, right? Well, think again, because these offers may come back to haunt you.

First off, it’s no coincidence that you’re being offered these “great” deals on a store credit card. Thanks to public records and credit databases, the whole world knows you just bought a home. It’s like when you get in a car accident, and all of the sudden you start getting letter after letter from attorneys.

Unfortunately for many folks, that deal is just too tempting and before they know it they’ve racked up $3000 worth of charges on three different, brand new, credit cards. If you can afford the payments, then what’s the problem, you ask? Well, it all has to do with your credit score.

The credit inquiry itself can lower your score 5-10 points, regardless of whether you open the account or not. Now, if you do open these and max them out, you’re looking at a drop in your score of 25-50 points. If these are $1000 each, and you have taken out and maxed out three cards, you’re looking at least at a 75-150 point drop in your credit score.

Fast-forward. It’s a year or so later, rates have dropped and you want to refinance. Well, that 740+ FICO score you used to have is now in the 600s, and the potential savings you may have had are out the window since your credit score has now dipped to a point where a better refi rate is out of the question because of your lower credit score.

Moral of the story: If you’re considering opening up a new credit card after closing, please make sure to ask an expert, like the team at Accunet Mortgage, so you can understand all potential ramifications.

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