While getting a sign-up bonus from a credit card may have some negative impact on your personal credit score, the benefits that come with these bonuses can often outweigh any potential downsides. Here are some reasons why:
Increased credit utilization: Applying for a new credit card can decrease your credit utilization rate, which is the percentage of your available credit that you are using. This can have a positive impact on your credit score, as credit utilization is one of the key factors that credit bureaus use to calculate credit scores.
New credit lines: Opening a new credit card also increases your available credit, which can have a positive impact on your credit score as well. This is because having more available credit can lower your credit utilization rate, as mentioned above.
Sign-up bonuses: Credit card sign-up bonuses can be a significant source of rewards or cashback. These rewards can offset the costs of the credit card, such as annual fees or interest charges. In some cases, sign-up bonuses can be worth hundreds of dollars, which can be well worth any temporary hit to your credit score.
Credit mix: Having a mix of different types of credit, such as credit cards and installment loans, can have a positive impact on your credit score. So, if you don't already have a credit card, getting one can help diversify your credit mix and boost your credit score.
However, it's important to note that applying for multiple credit cards within a short period of time can have a negative impact on your credit score. This is because credit bureaus may see this as a sign of financial instability or overextension, and it can lower your credit score. So, it's generally a good idea to space out credit card applications over time to avoid any negative impact on your credit score. Additionally, it's important to use credit cards responsibly, pay your bills on time, and avoid carrying balances in order to avoid any long-term negative impact on your credit score.