Can Getting Credit Help My Credit Score?

The FICO score is the most widely used credit score used by lenders to determine your eligibility when you apply for credit cards and loans. Applying for credit, especially if you do not have other loans or credit cards, helps your credit score by improving your mix of credit, which accounts for 10 percent of your credit score.

New Credit Inquiries

When you apply for new credit, the creditor almost always pulls your credit score. When they do, your credit report notes the inquiry, which lowers your credit score. The more applications for new credit you have, the more your credit score will be lowered. However, new credit inquiries only account for 10 percent of your credit score, so one or two inquiries will not have a significantly negative impact. In addition, unlike most other information, inquiries only remain on your credit report for two years.

Credit History

Getting credit will result in your payment history being reported on your credit report. This can be a benefit or a drawback depending on how well you pay your bills. Making on-time payments on a consistent basis over time will help your credit score because your payment history accounts for 35 percent of your credit score. However, payment history is a double-edged sword because if you miss payments, or become delinquent on your accounts, your credit score will suffer.

Length of History

If you wait until you need a large amount of credit, such as a mortgage, before applying for any credit, you could face a difficult task because you will not have established your credit history. Your length of credit history counts for 15 percent of your credit score with longer credit histories receiving higher scores. Applying for credit early will help your score because you will be able to show you can manage your finances for a longer period of time.

Lowering Debt to Available Credit Ratio

The amount of money your owe accounts for 30 percent of your credit score. Part of that category looks at how much you owe compared to your maximum credit lines. MSN Money recommends keeping your balance under 30 percent of the maximum amount you can use on your cards. If you have multiple cards, you can benefit from the extra available credit on cards you do not use regularly or you can spread your spending over multiple credit cards.