How does opening a new bank account impact your credit score? However, opening a new account can have a negative affect on your credit score. Only 10% of your total score is affected by new credit. Your credit utilization and payment history make up a greater part of your score. Fortunately, there are ways to minimize the impact of new credit accounts.
Open a cash management account
A cash management bank allows you to manage money and make deposits without the need to open another checking account. These accounts do not usually have any fees, but fees may apply if you withdraw funds early. Cash management accounts offer simplicity, a steady return on your cash, and are less expensive than dedicated accounts. While they don't have the same features as dedicated accounts but they offer simplicity and a solid return on your cash, they are an excellent choice for those with limited time to manage their money.
Do not open another credit card.
The opening of a new card account with a credit company can have a negative impact on your credit score. Your credit score will be affected by the age of your credit history. This is 15% of your overall score. Also, a new credit card account will make you seem riskier to lenders, as you may have less available cash to pay your bills. You should wait until you have established credit before applying for a new card.
Avoid opening a new checking account
It's possible to think that opening a checking account will not affect your credit score, but it isn't true. There are some banks that will check your credit score to approve you 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. To avoid a hard inquiry, contact the bank prior to opening an account.
Avoid overdrawing a checking account
You might be tempted to spend more on a new checking account than you have. This is why it is important to choose a checking card with a generous policy on overdrafts. It's also a good idea keep track of all electronic transactions. This way you will know when you have sufficient funds and when you are close to zero.
Don't apply for a credit card with a new company.
Although it may seem appealing, applying for credit cards can have a negative impact on your credit score. Your credit score will recover if you use the card responsibly. Moreover, you should avoid applying for multiple new cards at one time. This will prevent you from getting a hard inquiry on your loan application. WalletHub's free credit score calculator is a great way to find out how your new application will impact your credit rating.
Pay your credit card on time.
Late fees are a common occurrence with credit cards, but you can prevent them by paying your bill on time. It is easy to forget about paying the minimum amount. However, late payments can not only affect your finances but also your credit score and credit report. You can request a waiver of fees if you have not missed a payment in the past.