We are in the final section of the ever so frustrating calculation of the credit score. The New Credit section of your credit is broken down into basically two parts: Inquiries (where you have already received brilliant tips on) and new accounts. When obtaining a new account, regardless of what type of account it is, a very common deduction on your credit score may be around 40 points give or take. However, you may not notice this much of a whack on your credit score, due to the fact you simultaneously positively impacted other areas of the scoring model which might have offset the damage. You cannot let this section scare you though as it’s a necessary evil. Not having a credit card for example because you are worried about an initial deduction is like not cashing in you winning Powerball ticket for fear your distant relatives are going to start stopping by more often. That’s when laser sharks swimming around your moat become useful.
Whenever you open up a new account, OR refinance an older one (the impact is the same), expect a significant score penalty. The penalty timeframe is pretty typical for around 90 days or so. The madness behind this initial score deduction for a change makes sense which is that the scoring model wants you to see how you handle your new debt before allowing you to be involved with anymore. After a few payments on your new loan the scoring algorithm becomes more lenient, and most of your damage will reside in your now shorter Length of Credit section instead.