Think Before Applying for a New Card to Pay Down Debt

Drowning in credit card debt and wondering what you can do to get out of it? If you are thinking about applying for a new credit card in order to perform a balance transfer, you just might want to reconsider. This is particularly true if your debt is rather high when compared to your income…

While applying for a new credit card may seem like a good way to get a lower interest rate in order to reduce the finance charges you are paying, you might really be hurting your credit more. Quite simple – if you keep applying for credit cards in the hope of getting a better interest rate, and you are turned down, this reflects poorly on your credit score. Every time you apply for credit, it is listed on your credit report and forces a blow to your overall credit score.

As a result, you can actually increase the effective interest rate that you’ll be required to pay when your credit score goes down because your perceived credit risk will increase as the result of all the applications you are sending in. In the end, it could take you even longer to get those credit card bills paid off.

So, consider your debt-to-income ratio before applying for new credit cards for balance transfers. If you owe more than 50% of your annual income, you will probably have a difficult time getting a new card. Instead, just concentrate on getting the bills paid down and consider doing a balance transfer sometime down the road.

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This entry was posted on Tuesday, January 30th, 2007 at 1:34 am and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.