The Impact of New Accounts on Credit
If you have opened many new accounts with lenders within a short amount of time you can ruin your credit score. This is particularly true if you apply for lots of credit in a short time but you don’t have a long credit history.
So what constitutes a reasonable amount of time between the opening of new credit accounts. According to Isaac Fair the minimum amount of time that you need to honor before applying for a new loan with a lender is 20 months or you will negatively affect your score in some way.
Your most recent applications for credit affect your credit scores in the following ways.
• How many accounts you have applied for recently
• How many new accounts you’ve opened
• How much time has passed since you last applied for credit
• How much time has passed since you have opened an account
You might have heard that shopping around for credit can hurt your score. This is certainly true if you make too many applications. However the FICO formula takes into account that people tend to need some kind of a break when it comes to applying for certain loans like auto financing and mortgages so you are allowed a two week period in which to shop for as many interest rate comparisons as you want with only one hard inquiry comment working against you on your credit report.
The only way this could hurt your credit if applications for credit are consistently repeated and extended over a period of several months. So when shopping for interest rates for a mortgage or car loan it is best to keep it within that two week period.
Another myth (similar to the one that shopping around for credit can hurt your score) is the one that says that pulling your own credit report can hurt your score. As long as you request it directly from the credit bureau or a reputable intermediary (such as a bankruptcy trustee) the inquiry won’t count against you. However many people make the mistake of having a lender pull their score for them so they can see it, which is definitely a way to accidentally hurt your score. When in doubt, do it yourself to avoid any damage to your credit rating.