How does my credit card affect my credit score?

by elizabeth , in category: Banking and Credit , a year ago

How does my credit card affect my credit score?

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1 answer

by roderick_marquardt , 10 months ago

@elizabeth 

Your credit card can have both positive and negative effects on your credit score. Here's how it can impact your credit:

  1. Payment history: The most significant factor in calculating your credit score is your payment history. Making timely payments on your credit card bills helps build a positive payment history, which can boost your credit score. On the other hand, missing payments or paying late can have a negative impact on your score.
  2. Credit utilization ratio: This ratio is calculated by dividing your credit card balances by your credit limits. Keeping your credit card balances low in relation to your credit limits shows responsible credit usage and can improve your credit score. A high credit utilization ratio, on the other hand, can negatively affect your score. Experts generally recommend using less than 30% of your available credit.
  3. Length of credit history: Your credit card's impact on the length of your credit history is influenced by the age of your credit card account. The longer you have a credit card account in good standing, the better it is for your credit score. Therefore, closing an old credit card can potentially shorten your credit history and have a negative impact on your score.
  4. Credit mix: Utilizing different types of credit can positively impact your credit score. Including a credit card as part of your credit mix can show lenders that you can handle various types of credit responsibly. However, this factor has a minimal impact compared to payment history and credit utilization.
  5. New credit inquiries: Applying for new credit cards results in a hard credit inquiry on your credit report. Multiple inquiries within a short period can have a negative impact on your score. Therefore, it's generally advised to be cautious about applying for too many credit cards in a short period of time.


Overall, using your credit card responsibly by making payments on time, keeping balances low, and managing your credit wisely can positively impact your credit score and demonstrate responsible credit behavior to lenders.