When used responsibly, an additional line of credit can increase your credit rating. It is necessary, however, to maintain a healthy mix of different types of credit to keep your credit report balanced. This reflects well on you when your report is viewed by lenders.
Types
The types of debt reflected on your credit report account for 10 percent of your score. A line of credit is a revolving account because the amount you owe and the payment amount may change over time. An additional line of credit will provide a good balance to your report if the majority of your debts are installment accounts, such as loans.
Benefits
A debt-to-limit ratio is the percentage of your spending limit that you owe on your debts. Additional lines of credit reduce this ratio, which benefits your credit score--especially if you always carry a balance under 10 percent of your limit on your revolving debts.
Disadvantages
Having too many open lines of credit may be considered risky financial behavior by future lenders who review your credit history. This can result in a higher interest rate on new credit or loans that you are approved for.
Considerations
Your credit rating may drop slightly when your new line of credit appears on your report. This is due to the inquiry that the lender conducts to determine your eligibility for new credit. This is normal, and your score will recover quickly.
Warning
If you do not make regular payments on your lines of credit, your credit report will reflect late payment notations. Your payment history makes up the largest percentage of your credit score, and late payments will significantly hurt your credit rating.
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