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. You can minimize the impact from new credit accounts.
Open a cash management account
A cash management account allows you to manage and deposit money without opening another checking account. These accounts don't usually have fees but you will need to pay fees if your money needs to be withdrawn early. Cash management accounts can be simpler than dedicated accounts. They also offer solid returns on your cash. Although they may not have all the same features as dedicated accounts, they can be a great choice for those who are busy managing their money.
Avoid opening a new credit card
Opening a new credit card account can negatively affect your credit score. The average age of credit history is reduced by 15%, which can negatively impact your credit score. A new credit card account can make you appear more risky to lenders as you might have less cash available to pay your bills. A longer credit history is better than waiting before applying for new credit cards.
Do not open a new checking or savings account.
It's possible to think that opening a checking account will not affect your credit score, but it isn't true. Some banks will review your credit score in order to approve you for the account. A "soft pull" does not hurt your credit score, but a "hard pull" or "hard inquiry" can negatively affect your credit score for up to 12 months. To avoid a hard inquiry, contact the bank prior to opening an account.
Avoid overdrawing your checking accounts
It can be tempting to open a checking account and spend more than you have available. A checking account with a generous excess fund policy is the best way to avoid this. It is also a good idea to keep track of all transactions made by electronic means. This way you will know when you have sufficient funds and when you are close to zero.
Refrain from applying for a brand new credit card
Even though it might seem tempting, credit card applications can have a negative effect on your credit score. Your credit score will recover if you use the card responsibly. You should also avoid applying for multiple cards at once. This way, you won't risk getting a hard inquiry just before an important loan application. WalletHub's complimentary credit score simulator allows you to assess how your application will affect your credit score.
Pay your credit card on time.
Late fees are very common with credit cards. You can avoid them if you pay your bill on-time. Sometimes it is easy to forget to pay the minimum amount, but late payments not only hurt your finances, but they also affect your credit report and score. If you haven't missed a single payment before you can ask for a waiver.