Does Care Credit Application Affect Credit Score?
What most people ask themselves is whether they are going to affect their credit scores when applying for CareCredit. CareCredit is a healthcare credit card designed for use to cover the costs of most healthcare procedures and services that are not reimbursable through insurance. Like with any credit application, the effects on the credit score should be taken into consideration before applying. Now dig deeper into how the CareCredit application impacts your credit score.
What is CareCredit?
CareCredit is a master credit card and special-purpose financing for use in healthcare procedures and facilities. It works like a common credit card, but it is to be used for only the healthcare facility that has been authorized like doctor’s visits, dental procedures, optical works, beauty enhancements, hearing aids, and so on. CareCredit has special financing options which are deferred interest financing and no interest if the balance is paid before the expiration of the promotional period. It is issued through a bank commonly referred to as Synchrony Bank.
Is CareCredit a credit card and does applying for it have an impact on your credit score?
Even by filling out a CareCredit application, one gets what is referred to as a hard credit check. Hard inquiries happen every time the borrower applies for a new credit account, such as a credit card, personal loan, or financing company. One hard credit check can result in a slight decrease in your credit score usually by a few points. However, such inquiries are reported on your credit report for two years.
Thus, many hard inquiries within two years can indicate increased credit risk to potential lenders in case of applying for more credit products. This is especially true if you have applied for several credit accounts in a short period. This is because frequent use of hard inquiries or opening new accounts may affect your chances of getting credit approval.
However, having just one hard inquiry from submitting one CareCredit application can negatively impact an existing good credit standing with a long credit history. As long as you are not keen on opening many credit products shortly, the CareCredit application credit check shouldn’t bother you in the long run. People with existing bad credit standing may experience a bigger change in their scores.
Ways to Avoid Credit Score Effects
If you are concerned about minimizing the impact on your credit from applying for CareCredit, here are some useful tips.
Do not apply for credit within three to six months of the previous application to limit the number of hard inquiries. It is not advisable to open many accounts in a given period.
In the case that you are rejected for CareCredit, do not apply again soon after because rejection inquiries are also reported. Wait and see and check the credit report before jumping into it.
Request CareCredit to perform what is known as a soft credit check, which does not involve a rigorous credit check. This helps you to know if you qualify for pre-approval without the immediate hard credit check being conducted. Nevertheless, a hard check will still be needed to open an account in case you have been pre-approved.
Pay all the existing outstanding balances to less than 30% of the credit limit and ensure that all future bills are paid on time as a way of improving the credit scores after new inquiries. Credit utilization should be below 30% to show credit card companies that you are responsible for managing the credit they extended to you.
To put this into perspective, FICO credit scores are between 300 and 850. Ideally, a credit score higher than 670 is regarded as good credit, and a credit score above 800 is considered to be excellent. An individual new investigation can lead to a 5-10 point temporary dip below 700. The effect of the starting score is that, the greater the starting score, the lower the impact. If a person has been approved for CareCredit, then the account must be used responsibly and pay the bills on time so that it helps build credit for usage.
Understanding the Advantages and Disadvantages in Your Circumstances
New credit is never risk-free and should be sought only after careful consideration of your financial position and creditworthiness. It is recommended that those who currently have low scores below 600 may not wish to indulge in any credit checks until they get a better profile.
However, with the flexibility that CareCredit offers coupled with other benefits, accepting a 5-point temporary hit may be worth it for those with relatively good credit scores. It is always important not to overextend your credit by applying for more credit than you can manage.
Only use new credit responsibly and pay bills on time. It is also important to occasionally check your credit to ensure that approved accounts are not causing any harm. Compare the advantages of the CareCredit application against the negligible credit inquiry effects. When used responsibly after approval, CareCredit can lead to an improvement of thin credit files. However, it is advisable to always discuss major financing decisions with a financial advisor to know what
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