Having a high credit score opens many financial doors, as well as making potential loan options cheaper. This means that consumers need to aim for as high a score as possible. If you want to improve their current standing, opening a new credit account can be a good step to take.
Establishing a new account can boost your score by two methods:
- The first is by increasing someone's credit utilization ratio. By having more credit available, as long as your balance remains low, you will have a higher ratio of debt-to-available credit. This is a good thing in any lender's view, showing that, despite having access to large amounts of credit, you can refrain from using it all.
- Secondly, having another account helps to improve your "credit mix". For example, if you take out a small loan or a single credit card, applying for a store card adds another financial aspect to your history. Lenders can look at these alternative accounts and see that you are able to handle various kinds of credit accounts responsibly.
It is important not to open too many accounts at once. Your credit score may be penalized when the number of recent enquiries for credit increases, so it's best to apply for one at a time. Then, based on the speed of processing the new account and reporting it to the credit agencies, you can hope to get a credit score boost within six weeks.
If you want more credit, check out MoneyTips' list of credit card offers.