A lot of factors can affect your credit score, and one of those is your credit card. Owning a credit card is a huge responsibility. You have to use it with caution, and before you do use it, it is advisable to compute and budget your expenses, and whether you have the capacity to pay for what you’ll be buying with it.
Credit cards definitely have a huge impact on your credit score. It can make or break your score, so you always have to be extra careful. Now, what exactly is a credit score? It is based on the information of your credit report, which is a record of your credit and loan accounts that you have acquired over the past months or years. Your credit card issuer reports your credit card activity to major credit bureaus for it to be included in your credit score. You have to make sure that your credit score is always good, especially if you are fond of borrowing money from lenders.
Credit Limit and Balance
Every credit card issuer sets a certain amount of limit for every customer that they have. The amount is personalised based on their salary and income, and the amount differs from person to person. Maxing out your credit limit is not a good idea, as experts say that companies and lenders look at this as a “bad sign”. This is often an indication of you being a “risky borrower”, even if you pay it on time. Make sure to leave at least 30 percent of your credit limit unused to avoid being put in an icky situation.
Credit Card Payment (or Non-Payment)
Paying your credit card balance late will definitely put a dent on your credit score. On time and early payments will help boost your credit score, so you definitely want to plot that on your calendar. This is very important to remember as late payments can directly affect your credit score. Being a few days late for payment is fine, as credit bureaus do not report the case unless it is 30 days late. However, as with any case, the earlier, the better.
Credit Card Applications and Ownership
Having several credit cards can be a red flag for lenders, as it usually means that you are in debt and that you need credit cards to get by. However, you can have a number of credit cards and still have a high credit score, as long as you do not use them all and you do not max them out.
Sticking with the Same Credit Card
Now, this is a positive sign for lenders. The longer you have had your credit card open, the better it is for your credit score (as long as you have a good payment history). You have the option to enrol for new credit cards, but keeping and using your old credit cards will constantly keep your credit score in good shape.
Basically, paying on time and keeping a good relationship with your credit card company will keep your credit score in great shape.