By John Campbell
Opening new credit accounts in your name will affect your credit score. Any new credit accounts may account for roughly 10 percent of your overall credit score.
To avoid lowering your score you should try to open no more than two credit accounts during a 1 year period. For every account you try to open, your new potential lender will run your credit to make sure you meet the minimum qualifications for the line of credit you seek. These lender inquiries will be noted on your credit report. Any more than two inquiries during a 1 year period may lower your credit score. Too many inquiries may indicate financial instability on your part and give some potential lenders cold feet if you try to open a new line of credit.
Although your score may only be lowered a few points for each inquiry over your allowed limit, every point may count if your credit score is borderline excellent, good or poor. You don’t want something as simple as a lender inquiry to hurt your credit rating. Your credit score is safe from other types of inquiries not associated with a new lender planning to extend you a line of credit, however.
If you initiate an inquiry to check your own credit score it won’t be counted against you. Employer inquiries for certain job positions you may interview for and promotional inquiries won’t count against you either. Your credit score is also safe from any administrative inquiries from current lenders who may change your credit limit from time to time. If you’re in the market for a home mortgage, you’ll be free to let competing lenders run your credit as many times as you like within a 2 - 4 week period. The credit bureaus will not punish you for shopping around for the best loan and will lump multiple inquiries for the same type of loan within that time frame into only one inquiry.
New credit accounts may have a very minor effect on your credit score. All inquiries will be listed on your credit report for 2 years. If you already have two inquiries under your belt for the current year, you will want to get copies of your credit reports before making the decision to let any potential lenders run your credit again. If a few point loss will put you into a credit range you don’t want to be in you should avoid applying for any new lines of credit.
Remember, when it comes to your credit score, every point you may save can add up and will have an impact on your credit score in the long term.
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John Campbell is the writer and editor of CashBuzz, A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.
