Recently Opened Credit Lines Can HURT your FICO Score

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The following screen shot is the credit alerts section of my $14.95 per month FICO online credit score service. I am quite impressed with it. Much better than the more expensive  $29.95 per month product TransUnion charges you!

You will notice a New Accounts tab on the credit alerts page. A new account could be an indication that someone out there had fraudulently opened an account using your personal information, i.e. identity theft OR it could be an indication that you are too stretched out or desperate for additional credit :

The potential effect of a new credit account on your FICO  credit score will vary and depends on a number of factors.

A new account on your credit report may initially lower your FICO score because it can be an indication that you need more credit. Typically, consumers with financial difficulties need more credit and are less capable of paying their debts.

While your FICO score could drop when a new account is first reflected on your credit report, it can positively affect your score over the long haul if you use the line of credit responsibly. This means making all payments in full and on time. Opening a new account can also help your FICO score over time if you had a credit history with very few accounts when you opened the new account.

How a new account impacts your FICO score also depends on your particular combination of credit. For example, opening a new mortgage account probably will boost your credit score more than opening another credit card account.

Also remember there is a lag associated with when your creditors actually report your payment history to places like Experian, Equifax, and TransUnion. So your 3 month old card still appears new to potential lenders from a credit reporting perspective!

Finally, you know those interest free balance transfers that do not EVEN CHARGE YOU A BALANCE TRANSFER FEE? Just when you think you are getting something for nothing, you are really getting screwed a little here also because even though you may not be getting charged for carrying a large balance on your new account, you still have a high balance NEW ACCOUNT.

 

Getting Another Credit Card Can Hurt Your Credit Score
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