Checking out credit card offers on the Internet can be a convenient way to compare interest rates and get the best deal out there, but applying for too many cards could hurt your credit.
Credit experts warn that those who shop for loans or credit online can easily rack up several inquiries on their credit report in one sitting. The number of inquiries into your credit report can reduce your overall credit score. Lenders use credit scores to determine if you are a good risk for credit cards, auto loans or a mortgage. Multiple inquiries are interpreted as a sign that you have been actively seeking credit, and may be in financial difficulties or in the process of overextending yourself. Mortgage shoppers are the exception-because many people check with several mortgage brokers while house hunting, scoring models make allowances for clusters of inquiries that indicate comparison-shopping. But experts still warn that online credit shoppers' scores can decline so much from multiple inquiries that they must wait months to be eligible for good terms on credit cards or auto loans.
If you are shopping for credit cards online, browse before you apply. Check out many sites and keep a written list of interest rates, how long low introductory rates last and if the card has a monthly fee. Some cards also offer cash rebates or other benefits, such as frequent flyer miles. Bookmark the offer sites or write down the web site address so you can easily get back to an offer if you choose to apply. Once you have a good sample, compare the card offers and apply for the best one.
Experts suggest that credit scoring be changed to accommodate consumers who prefer to apply for many cards and narrow their choices from there. A recent study found that nearly half of web credit shoppers filed credit card applications via the Internet. Credit hunters are more willing to apply for a new credit card account online than complete detailed applications for other types of credit, such as mortgages. Other types of credit are less attractive to online shoppers-only 23 percent of people in the same study applied for mortgage loans online and about 16 percent who were looking for auto loans or leases filled out electronic applications. About 9 million U.S. consumers have applied for new credit cards online. Analysts say the change should be made soon before declining credit scores undermine consumers' trust and retard the growth of e-lending.
To read more on Credit and Credit Scoring:
What is a Credit Score?
How Can I Establish or Rebuild Good Credit?