How Credit Cards Impact Your Credit Score

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credit cards impact your credit score

Credit cards are excellent tools that almost anyone can have. However, you need to learn to use them responsibly so that you don’t end up spending unnecessary money. Some mistakes might hurt your credit score, making you lose some points.

How credit cards impact your credit score:

Credit card requests

Too many credit card requests can definitely hurt your credit score. Every time you make an application for a new credit card, a hard inquiry is added to your report. Therefore, before applying for a new one, consider doing extensive research for the credit card that meets all of your needs.

Closing old credit card accounts

Contrary to common sense, closing old credit card accounts is not a good idea. If you close your old accounts, your credit utilization ratio will rise since you’ll have less available credit. The credit bureaus use this system to evaluate your creditworthiness. Older accounts also have better chance of approval for a better card with more rewards.

Payments

Never make late credit card payments, since this decision can affect your credit history negatively. The amount you pay may also have an indirect influence over your report. It’s always best to you pay the full balance amount since it can help to boost your credit.

Credit Limit

Unless you own a charge credit card, you most likely have a preset limit to spend. Finance experts don’t recommend maxing out your card since it can look like you’re a risky borrower. They recommend keeping your balance below 30% of your limit.

Too many credit cards

Specialists believe that having too many credit cards is not a good idea, especially if you are a credit newbie. Opening too many accounts is one of the factors that borrowers use to evaluate if they are going to grant you credit or not. Therefore, think about your needs and evaluate the pros and cons before choosing a new card.

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