How does opening a new bank account impact your credit score? Although new credit can have a negative impact on your score it makes up just 10% of your overall score. Your payment history, credit usage and payment history are a large part of your score. There are ways to reduce the impact on new credit accounts.
Open a cash management account
A cash management account allows you to manage and deposit money without opening another 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. 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.
Don't open a brand new credit card.
Your credit score can be negatively affected by opening a new credit card. It reduces the average age of your credit history, which is 15 percent of your overall score. A new credit line will make you look more risky to lenders because you may have less money to pay your bills. You should wait until you have established credit before applying for a new card.
Do not open a new checking or savings account.
Although you might think that opening a new checking account won't hurt your credit, it's not true. 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. To avoid a hard inquiry, contact the bank prior to opening an account.
Avoid exceedingly drawing your checking account
It can be tempting to open a checking account and spend more than you have available. You can avoid this by selecting a checking bank with an expansive overdraft policy. It is a good idea, too, to keep track of any electronic transactions. You'll be able to see when funds are available and when they're getting close to zero.
Refrain from applying for a brand new credit card
Although it may seem appealing, applying for credit cards can have a negative impact on your credit score. The card should be used responsibly to help your credit score improve over time. Avoid applying for multiple cards at one go. This will prevent you from getting a hard inquiry on your loan application. WalletHub offers a free credit score simulation that will help you see how your new application might affect your credit score.
Pay your credit card on time.
Late fees are common with credit cards. However, you can avoid them by paying your bill promptly. 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. If you have never missed a payment before, you can even ask for a fee waiver.