You are thinking about buying a new home or new car. Congratulations! If you anticipate applying for a large loan or mortgage in the near future, it is best to avoid any other credit applications until after you close on that loan.
The best practice is to avoid opening any new credit lines for 6 months prior to your large application. The reason for this is due to credit card applications creating hard inquiries on your credit score. Hard inquiries represent potential debt that lenders want to guard against when evaluating your credit worthiness for a large loan. You also want to avoid opening any new lines of credit while you are in the loan process. Once you have been pre-approved for a loan or mortgage, any new credit that shows up on your credit score may disqualify you for the loan you have been pre-approved for.
How to earn points
While you should hold off on applying for new credit, don’t let this discourage you from earning points! Once you close on that house or new car, you may have some budgeted purchases to make. For example, home improvements, a new TV, new couch, yard work, a tank of gas, etc. Put these budgeted expenses on a credit card and earn valuable points. We find that some of the best point earning opportunities are tied to big ticket purchases that have already been budgeted. If you are going to spend money anyways, you may as well earn some points that can be used for free travel!