Video: How your credit mix and new credit affect your score

 

Your FICO score isn’t just some random number. It shows credit card companies, landlords and bill providers how financially fit you are. You probably already know that paying your debt in full and on time equals a healthy score. But there are a couple of lesser known factors that affect your score, too.

New credit and credit mix each make up 10 percent of your FICO score. But what do they mean, exactly? For one, applying for new credit can hurt your score. FICO says borrowers with too much new debt are more likely to be delinquent or miss payments.

To gauge new credit, FICO looks at how many accounts you’ve opened in the past six to 12 months, how long it’s been since you’ve opened those new accounts, and how many recent inquiries you’ve had on your report. There are two types of inquires: soft ones and hard ones.

When you pull your own report, that’s a soft inquiry and it won’t hurt your score. When you apply for new credit, however, and the lender pulls your report, that’s a hard inquiry, and it can hurt. To keep your score intact, FICO recommends only opening credit accounts you actually need.

And then there’s credit mix. FICO likes to see a little variety on your report, from credit cards to mortgages to car payments. It shows you can handle different types of debt. Does that mean you should go apply for a loan just to mix things up? No way! Again, you want to be selective and only use credit when you need it.

It helps to know what impacts your score, but in general, if you pay your debt in full and on time, you’ll be in good shape.

See related: What is your credit utilization ratio?, FICO's five credit score factors


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Updated: 11-21-2017