How does opening a new bank account impact your credit score? New credit can have a negative effect on your score, but it only makes up 10% of your total score. Your payment history and credit use make up more of your score. There are ways that you can reduce the impact of opening new credit accounts.
Open a cash management account
Cash management accounts allow you to manage your money, make deposits and close checks without opening a separate 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. They may not offer all the features of dedicated accounts, but they are a good choice for people who have little time to manage their money.
Avoid opening a new credit card
Your credit score can be negatively affected by opening a new credit card. This can reduce your credit score by 15 percent as it lowers your average credit history. Also, a new credit card account will make you seem riskier to lenders, as you may have less available cash to pay your bills. Before applying for a credit card, it is best to wait until your credit history has improved.
Avoid opening a checking 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", while not affecting your credit score can affect it for up to 12 month. However, a harder pull or hard inquiry can adversely impact your credit score. You can avoid a hard inquire by calling the bank before you open an account.
Avoid exceedingly drawing your checking account
You might be tempted to spend more on a new checking account than you have. It is best to avoid making this mistake by choosing a checking account that has a generous overdraft policy. It's also a good idea keep track of all electronic transactions. You will be able to tell when you have enough funds and when your close to zero.
Applying for a new card is a waste of time
Even though it might seem tempting, credit card applications can have a negative effect on your credit score. The card should be used responsibly to help your credit score improve over time. 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 offers a free credit score simulation that will help you see how your new application might affect your credit score.
Avoid late payments on credit cards
Late fees are very common with credit cards. You can avoid them if you pay your bill on-time. It's easy to forget to make minimum payments. But late payments can have a negative impact on your credit report, score, and finances. You can request a waiver of fees if you have not missed a payment in the past.