How does your Credit Card Influence your Credit Score

Credit Card Influence your Credit Score

Owing is a credit card is more of a responsibility than you may think off. You not only have to be responsible enough to charge only what you can afford but also have to ensure that you make payments in time. Everything you do with your credit card makes an impact on your credit score. Even not having a credit affects your credit scores. Credit cards can either help you make up or break up your credit score depending on how you use them.

A Credit Score is a numeric representation of your credit report. The credit report is a record of all your financial transactions such as the number of loans you have, the timely payments made towards your loan, the defaults, account status, date you opened your account etc. Every month your credit card reports your credit card activity to the credit bureaus. This activity gets recorded in your credit score.

Just Having a Credit Card Affects Your Credit Score

If you are a person having no credit card then your credit score will be affected negatively owing to the lack of any credit history. It is important that you must have an active credit card account on your credit report in order to have a credit score.

Credit cards are the most convenient type of credit accounts that can help you build your credit history and your credit score. While the credit cards help you build a good credit history they also carry the potential to affect your credit score in a negative manner on account of late payments or non-payment of your credit card dues.

Having a good experience of maintaining credit cards as well as loans will give your credit score a boost.

Your Credit Limit and Balance Information

A lot of credit cards have a present credit limit, which is the maximum amountmade available to you by your lender. Even though they have given you this credit limit it would not look great of you to utilize the entire credit limit. Utilizing the entire credit limit makes you look like a risky borrower because of which your credit score may suffer. Most credit card issuers report a high balance which is the highest balance charged on the credit, therefore, even if you utilize the entire credit limit and pay it off your credit report can still show that high balance. Therefore, the best option is to keep your credit card balance below 30% of the credit limit assigned to you which will not show you in a poor light to your lender.

Your Monthly Credit Card Payments

Although the last payment made towards your credit card due is available on your credit report it is not necessary that it may be factored into your credit score. Your payment can indirectly influence your credit score, for example making a bigger payment can reduce your balance faster and thus boost your credit score.

Another factor influencing your credit score is the timely payments that you have made, if you make credit card payments in time it will boost your credit score positively, whereas if you delay in making credit card payments it will affect your credit score negatively. Late payments are not reported to credit bureaus, until they are atleast 30 days late.

Credit Card Applications

Whenever you apply for a credit card, the record of your application goes onto your credit report. Applying for too many credit cards in a short period of time can negatively affect your credit score as it shows that you are credit hungry. If possible you must try and not apply for too many credit cards at a time.

The Number of Credit Cards You Have

If a person has too many credit cards it can hurt the credit score of that individual. Although there is no certainty as to how many credit cards should a person carry to have a good credit score, but since carrying too many credit cards can lead to missing a payment or two ormake it confusing for you to maintain them it may affect your credit score in a negative manner.

Keeping Your Credit Cards for a Long Time

The longer you keep your credit cards open, the better it will be for your credit score, especially if you have a positive credit history with those cards. You must keep the oldest cards around and use them in a periodic manner to have a positive impact on your credit score, while doing so you must check the latest deals from time to time. If you are a good customer there are chances that you may be able to get credit card at good terms and reward points than the one you were using earlier.

The key to ensure that your credit cards do not hurt your credit score is to keep them open and active in a good standing while maintaining low balance.

Main Category: Credit Cards, Finance, Others