Credit Score Components - New Debt and Inquiries

New items on your report - credit inquiries and new debt - are looked at carefully by potential lenders, as they indicate that you might be overextending yourself.

For this reason, they are one of the five factors that comprise your FICO Score.

    • Your payment history 35%
    • The amount of money you owe 30%
    • The length of your credit history 15%
    • New debt and credit inquiries 10% (discussed on this page)
    • Your credit mix 10%

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How new debt affects your FICO Score

The fourth factor that influences your FICO credit score is your new debt.

Opening many new accounts within a short period of time can set off red flags to a lender, especially if your credit history is short. The indication to a potential lender is that the applicant (you) is getting in over her head, and that perhaps now is not the right time to extend more credit.

Lenders tend to ask two questions about your new debt:

    • How much time has passed since your last new account?

    • How many new accounts have you opened in a short period of time?

Ideally, your answer to Question 1 would be "A long time" and to Question 2 "Not many". But we don't live in an ideal world, and for this reason, the FICO Score quantifies these answers (as contained in your credit report), and presents the lender with an easy to understand score.


Managing a lot of new debt can indicate someone with little spending control. Be wary of falling into this trap.

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If you're trying to improve your credit, new debt is your friend. It may seem obvious, but opening a new account and managing it responsibly can indicate that your behavior has changed. That is what potential lenders want to see.

Check your own score to see where you stand, and find out if a new account might help your overall profile.

Credit inquiries and your FICO Score

Credit inquiries are requests from creditors to view your report or score or both. Multiple credit inquiries can mean that you're taking on too much debt all at once and may have trouble paying it off later. For this reason, having a lot of credit inquiries listed on your credit report negatively effects your FICO credit score.

That is the conventional wisdom.

In reality, a "hard inquiry" (an inquiry made by a lender based upon a credit application made by you to that lender) will only take a few points off your score, on average.

Soft credit inquiries, which are requests for information made by credit card companies looking to send you a pre-approved application, routine reviews of your file made by your current creditors, or even your own requests for copies of your report, are never counted in your score.

And finally, shopping around for the best possible rate on a loan (which almost always happens when you're car-shopping, or home loan-shopping) only counts as one hard inquiry on your report. In fact, all inquiries within a 30 day perio count as one aggregate inquiry, causing little harm to your FICO credit score.


Next: Your credit mix: the types of accounts you have affect your credit score.