Open Credit Accounts and Your Credit Score

Sometimes stores will offer you huge discounts on their merchandise if you open a credit account with them. But beware of opening too many open card accounts at different stores. The credit agencies keep track of all of your open accounts. After a certain number of open accounts, your FICO score will begin to decrease for each additional account that you open.

This applies for cards with the various card companies as well. The more card accounts that you open past a certain point, the more it negatively impacts on your FICO score.

The reason this happens is that each time you open a new account, the crediting reporting agency puts an entry on your report. For example, if for some reason, you were to open 25 new accounts at different stores, your FICO report would reflect each of these accounts. Too many accounts and your potential debt to credit ratio starts to look precarious.

And, depending on the particular reporting agency, each entry causes your FICO score to be deducted by at least a couple of points. If you have too many of these open accounts, especially in a short period of time, you may find that all of a sudden you are being denied credit.

If your balance on a card is near its limit, instead of opening a new account, see if you can increase the limit on one or more of your existing cards. As mentioned before, opening a new account can possibly have a detrimental effect on your FICO score. Increasing your limit on an already existing card, however, is not likely to affect your FICO score at all. In addition, the less lines of credit you have open at any one time the easier it is to keep track of your outstanding balances. This helps you to avoid the problems that many people have with losing control of their card debts.

Sometimes it can be hard to resist opening up a new accounts. The various card companies make billions of dollars off of their customers. As a result they are experts at coming up with all sorts of irresistible incentives to tempt you temporarily take leave of your senses and sign up for their new card. But, it is never too late to correct you mistake.

Take stock of all of your credit cards and begin to eliminate those that you really don't use. But don't just cut them in half. In addition, contact the card company and formally cancel it. This way, your cancellation will actually be reflected on your credit report.