“And would you like to open a [retailer] store card today to receive an extra 10% off your purchase?”

We’ve all heard this upsell strategy. The money savings may sound tempting, especially for a credit card affiliated with your favourite retail store, but store credit cards aren’t as great as they may seem. Store credit cards can negatively influence your credit score, carry high-interest rates, and encourage high utilization.

First-time homebuyers are often surprised that qualifying for a mortgage is much more difficult than qualifying for other types of loans. Home loans are typically large, so they represent a bigger risk for the lender. To play it as safe as possible, banks do a lot of digging into borrowers’ finances. This usually includes:

• Verifying your employment and income (you’ll likely need to provide supporting documentation for both).
• A review of your assets.
• A detailed review of your credit reports.
• A check of your credit scores.
• A calculation of your debt-to-income ratio.

To get approved for a mortgage at a good rate, you’ll need to present the best possible picture of your financial standing. You’ll also need to keep your financial standing steady between your initial application and finalizing of all the documents, which could take a couple of months or more.

A new retail store credit card application could interfere with the process

If you are applying for a mortgage, inquiries made to your credit bureau are considered soft inquiries and have minimal damage to your credit rating. However, if there are multiple inquiries for store cards, credit cards, lines of credits, loans etc. over a longer period, the credit bureau looks as this as “constantly seeking credit”.

The day after you close on the house, feel free to apply for a store credit card for e.g. a furniture store to furnish your dream home and any other card that can save you money on the many purchases you’re likely to be making as a new homeowner. But until then, don’t allow any creditor to so much as check your credit, let alone open a new account in your name. While it’s a little harder to estimate the number of points you can lose due to newly opened accounts and inquiries versus missed payments and maxed-out cards, studies show that, on average, people with the best credit scores (upper 700s) have not opened a new account in more than two years.

Before applying for a mortgage, we recommend reviewing your credit bureau report to give yourself time to correct any discrepancies you find.