Does opening a new credit account affect your credit score? While new credit has a negative impact, new accounts make up only 10% of your total score. Your credit utilization and payment history make up a greater part of your score. There are ways that you can reduce the impact of opening new credit accounts.
Open a cash management account
A cash management is an account that lets you manage your money and make deposit without opening a checking account. Although these accounts are free of fees, early withdrawals may incur fees. Compared to dedicated accounts, cash management accounts offer simplicity and a solid return on your cash. They might not have all of the features of dedicated accounts but they are a good choice if you don't have much time to manage your money.
Do not open a new credit line
A new credit card account could negatively impact your credit score. The average age of credit history is reduced by 15%, which can negatively impact your credit score. You may also appear less risky to lenders if you have a new credit account. This is because you may not have enough cash to pay your bills. A longer credit history is better than waiting before applying for new credit cards.
Avoid opening a checking account.
Even though you may think opening a new check account will not harm your credit, this is false. There are banks that will verify your credit score before you apply for the account. While a "soft pull" will not affect your credit score, a "hard pull" (or hard inquiry) can have a negative impact on your credit score for as long as 12 months. If you want to avoid a hard inquiry, call the bank before you open the account.
Avoid exceedingly drawing your checking account
You might be tempted to spend more on a new checking account than you have. A checking account with a generous excess fund policy is the best way to avoid this. It is also a smart idea to keep track and log all electronic transactions. You will be able to tell when you have enough funds and when your close to zero.
Applying for a new card is a waste of time
While applying for a credit card may be tempting, it can negatively impact your credit score. This will allow you to recover your credit score over time. Moreover, you should avoid applying for multiple new cards at one time. By doing this, you can avoid getting a hard inquiry before submitting a loan application. WalletHub's complimentary credit score simulator allows you to assess how your application will affect your credit score.
Don't make late payments for credit cards
You can prevent late fees from happening with your credit card. You may forget to pay the minimum amount. Late payments will not only harm your finances but also negatively impact your credit report. You can request a waiver of fees if you have not missed a payment in the past.