Choosing between a motorcycle and an engagement ring

Dear Experian,

I have been rebuilding my credit and would like to purchase a motorcycle and an engagement ring. If I apply for credit and get denied will my credit score go down and how long will the two remain on my credit report?



Dear ENB,

Because you are in the process of restoring your credit history, you probably need to choose one or the other. We usually don’t give relationship advice, but if you have any hesitation about which one you should buy, don’t purchase the engagement ring.

Using credit, other than for convenience and paying in full each month, requires that you make choices. You have to understand how that debt will fit into your overall financial plan and choose to make these purchases instead of other purchases in your future until the debt is repaid. Getting married is often associated with increased spending, so you certainly want to consider where both of you stand in terms of your savings and current debt before taking on additional debt that may become a part of your shared obligations.

If you decide to apply for the loans, being declined is not the issue. Whether a loan is approved or declined does not affect credit scores directly. However, there are two other issues that will, and both could be important if you have had recent credit troubles.

When you apply for credit an inquiry is added to your credit report. That inquiry represents potential new debt that doesn’t yet appear as an account in your credit report. That potential debt represents lending risk and so may have a small impact on credit scores.

If you have a strong credit history, you usually don’t need to worry about the impact of an inquiry. But, if you have had credit problems and your credit scores are marginal, a small change could be enough to cause you to be declined or be charged a higher interest rate. It sounds like that might describe your situation.

The other issue is that taking on new debt also introduces additional credit risk and so could have a negative effect on credit scores. Again, if you had a strong credit history the impact probably wouldn’t be of concern. But, because you haven’t demonstrated a consistent repayment history, the new debt could have a greater impact on your credit scores.

That negative impact could be enough to prevent you from qualifying for a future loan which could be important in your new married life.

I hope all goes well with your financial choices and your future. Best wishes to you and your future wife!

Thanks for asking.

- The “Ask Experian” team

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