How Important is it to Have New Credit? Take a look at what is required for positive credit to affect your FICO score.
The ratio for your credit scores consist of the 5 factors that are:
- 35%: Credit History
- 30%: Balances (or Debt Ratio)
- 15%: Length of Credit
- 10%: New Credit
- 10%: Mix of Credit Types
When considering whether or not you need to establish credit there are several factors that you must first take into consideration. If you have positive open credit you may not need to apply for new credit, to affect the Mix of Credit Factor you need about 1 to 1.5 revolving lines of credit to every 1 installment loan. If you get heavy either on either side of this equation it will offset your FICO® score to reflect a higher risk.
If you have had a negative payment history and have not established new credit you will want to take the step to re-establish a positive credit history. This step alone can affect 4 of the 5 Credit Factors in a positive way. Re-establishing credit and leaving a low balance will have a very good affect on your FICO scores and it is highly recommended.
Bottom line is that if you establish new credit your FICO score will more than likely decrease while you are establishing a payment history for this account.