Last Updated Dec 10, 2010 3:26 PM EST
When you're standing at the cash register and say "yes" to a retailer's card offer, you're officially applying for credit. The store then pulls your credit report and you end up with an official "inquiry". This can drag your credit score down by about 10 to 20 points and it remains on your credit report for 12 month, says Ulzheimer.
Taking on a new credit card will also lower the average age of your credit accounts. While this isn't nearly as damaging as, say, missing a payment, the age of your accounts still makes up 15% of your FICO credit score, according to Ulzheimer.
Then there's the credit utilization issue, which makes up 30% of your credit score. Folks with stellar credit scores tend to use no more than 30% of their available credit. And in an ideal world, Ulzheimer recommends you try to utilize just 10% of your credit line.
Store cards can hurt your credit utilization rate since they tend to have very small credit limits. Most start out by offering consumers a line worth just $500 to $1,000. Buy a couple of sweaters for family members and you could easily utilize more than 30% of your credit. (Credit scores look at both the utilization rates on separate cards and on all of your cards added together.)
Finally, shoppers should also be aware that the average interest rate on a store credit card is 25%, regardless of your credit score, says Ulzheimer. So if you take a few months to pay off your purchase, you've just lost that 10% discount you thought you snagged when you signed up for the card
What should you do if you did open that Gap card? Nothing. "The damage has already been done, don't compound it by closing all of your cards at the end of the 2010 holiday shopping season," says Ulzheimer.
Going forward, try not to use that your retailer card often and don't ever charge items that add up to more than 10% of your credit limit. If you're lucky, the store may increase your credit limit over time and that could actually help you raise your credit score.
Did you take out any store credit cards this year?
Stacey Bradford is the author of The Wall Street Journal Financial Guidebook for New Parents.
IGNORE This Present Credit Card to Cashier image courtesy of Flickr, CC 2.0.
More on CBS MoneyWatch:
Old Toys? 4 Tips When Donating Them
3 Holiday Lessons for Kids
Ugift: College Money is Just an Email Away
Charity: How to Teach Your Kids to Give