New credit, as defined by FICO®, consists of new accounts, inquiries, and the age of your newest account. That means opening a new credit account can have an impact on your overall credit score.

How much does New Credit Affect my Credit Score?

New credit is a minor part of your credit score, but the impact depends on the type of credit score. FICO® states that new credit makes up about 10% of a score. On the other hand, VantageScore® is less detailed in its explanations and considers new credit to be one of the less influential factors in your credit score.

The exact impact of new credit on your credit score will depend on several factors, including:

  • The length of your credit history
  • Your payment history
  • Your overall balances
  • The number of credit accounts you’ve opened recently.

That doesn’t mean new credit should be avoided. New credit can be an important way to establish a strong credit history and healthy habits that will eventually lead to a higher credit score. Sometimes you may need credit, to purchase a car, to buy a home, or just to make it over a financial hurdle, but you should always evaluate whether you can afford the credit before applying.

How Does New Credit Impact My Credit History?

Once you open a new credit line, it may take about four to eight weeks for the account to appear on your credit report. At that point, your credit score may take a temporary dip, but don’t worry: making consistent on-time payments will turn that new credit “blip” into another long-term positive for your credit history. If your new account is a credit card, make sure you keep the balance low to maximize the positive impact. 

You shouldn’t fret over the inquiry. Most inquiries don't affect your credit for very long, so if you’re only applying for what you need, you shouldn’t have anything to worry about. 

How new credit can help you if you are new to credit?

The key to having great credit is a long history of on time payments.  You can view opening new credit accounts as the beginning of that history. Just remember to stick to the basic rules: always pay on-time and keep credit card balances as low as possible. (Even better: pay them off every month in full.)

Should I open multiple accounts at once?

A rule of thumb: Only apply for what you need.  If you need a new credit card and a new car in the same month, no big deal. Keep in mind that if you’re new to credit and trying to establish your payment history, then two or three accounts is enough to build your credit.

Otherwise, opening several accounts at once isn’t usually advised for someone with an established credit history. This may signal to lenders that you are in financial trouble — or soon will be — and are applying for several lines of credit to cover expenses you cannot repay.

Are there things I should look out for with new credit?

New credit can have a negative impact on your credit scores, but it’s only temporary. Avoid the temptation to check your credit scores frequently while waiting for the impact to wear off. You don’t need that kind of stress! Instead, check once a month or so and keep plugging away with good credit habits. You’ll be on track to building a positive credit history.