Your account activity is reported by your credit card issuer to one (or more) of the three major credit bureaus every 30 days or so. Your credit score is then calculated based on this data. That’s why owning a credit card is more responsibility than most folks realize. Everything you do with your card impacts your credit score – right from applying for one to swiping it at the store. Read on to know how:
Not Having a Credit Card
A credit score can’t be calculated without a credit report and credit cards are one of the easiest ways to establish and build a good credit history. Plus, having a mix of credit accounts for 10% of your credit score. Any experience managing credit, in the form of cards and loans for example, and managing it well, will have a positive impact on your credit score.
Preset Credit Limit and Balance
Using the maximum amount of credit available to you makes you look like a risky borrower and will bring down your credit score. The highest balance ever charged on your credit card, or ‘high balance’ is reported by many credit card issuers. To ensure your credit score does not suffer, keep your credit card balance below 30% of your credit limit.
Monthly Credit Card Payments
On-time payments boost your credit score, while payments made 30 (or more) days past due will bring your credit score down.
The Number of Credit Cards You Have
Although the companies that developed the credit score haven’t revealed the exact number, we can safely say that having too many credit cards can hurt your credit score.
Canceling a Card
Closing a credit card instantly trims your available credit and shoots up your credit utilization ratio. This can negatively impact your credit score. If you have a positive payment history, keep your older credit cards open, active, and in good standing.