Even with the financial slow down and reduced amount of credit card offers in the mail, most retail stores are still offering their own credit card at the check-out register.  There are usually enticing discounts advertised on signs and by the clerks: “Save 10% on today’s purchase.”  “Apply for a ‘Our Store Name’ account today and get 20% off your total.”  You’ve seen them, maybe you have even taken advantage of those discounts.

With the holiday season approaching, and the traditional increase in consumer shopping over the last few months of the year, it pays to understand how those retail store account applications can impact your credit scores.

1) Just because you apply does not mean you will get approved for the retail store credit account.

2)  Any time you apply for credit or a loan, it is a Hard Inquiry on your credit report.  Hard Inquiries stay on your report for 2 years and count against your scores for the entire two years.

3) You will have the Hard Inquiry on your credit file whether you get approved for the store account or not.

4) Most retail store accounts have higher interest rates than major credit cards.  That store at the mall who offered you 10% off may be charging you 21.99% interest if you do not pay your bill off in full the following month.  The 10% you originally saved could be off-set by high interest rates on balances you carry.

5) The store account applications, and accounts with balances on them, could have a detrimental impact on the major loan you are planning in a few months.  This could be a new home loan, a mortgage refinance, or an auto loan.  Inquiries and extra debt can lower credit scores and creat barriers to the lender’s approval process.

In the excitement and busy-ness of holiday shopping, stop and think before you automatically say yes at the check out to apply for the store’s credit account.  It can mean a drop in your credit scores as well as the difference between approved and not approved on a large loan in your financial future.  You can read more about this topic in this article.