To have a credit card is very important. Because with it, you can make purchases and pay for purchases made. While doing this, you should consider the effect, whether positive or negative, the credit card has on your credit score. But, it is based on the way they are been used.
The fact is that your credit report determines your credit score should be put into consideration. This helps the credit provider to ascertain the possibility of you paying back the loan given to you, which is determined by a record of your credit and loan account under the control of the Credit bureau company.
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Do Credit Cards Affect Your Credit Score?
On a monthly basis, your credit card activities are reported to one or more of the major Credit bureau, by the credit card issuer. And this will be added to your credit report. Data such as; credit card balance, credit limit, payment history, account status, and date of account opening affects your credit score.
Having a Credit Card Affects Your Credit Score
The credit scores of those having no credit card might be affected. That is if they have any. Because, an active account of your credit report, will tell if you will have a credit score. So it will be very difficult for someone to be approved for a car loan, mortgage or an apartment without a credit card.
A credit card is a good option for establishing and building an excellent credit history, the reason being that, they are one of the approved easiest types of credit accounts. Also, good management also affects credit score. In addition, having an experience of varieties of credit accounts like; credit cards and loan has a positive effect on your credit score, due to the fact that a mix of credit is 10% of your credit score.
Credit Limit and Balance Information.
The credit limit for credit card varies, you might be asked to pay the maximum amount of credit, by your credit card issuer. However, a certain credit limit must have been given to you. As mentioned earlier good management matters because whatever you do affects your credit score.
It is advisable to leave your credit balance below 30% of your credit limit because, a lot of credit card issuer report a “high balance ” that even when paid by maxing out your credit card, there will still be a high balance. Thereby making you look like someone that is not trustworthy.
Monthly Credit Card Payments.
Your previous credit card payment cannot be added to your credit score but to your credit report. And the amount paid has an effect on your credit score. That is to say, bigger payment reduces your balance easily and as such may increase your credit score.
Punctuality in terms of payment also boost your credit score but delayed payment may result in a low credit score. Delayed payments are reported to the credit bureau once it is 30 days late and your credit score will be affected. But, you may be asked to pay a late fee when you are some days late on payment having your credit score unaffected.
Credit Card Applications.
Keeping your credit card application at minimum is better because, when such application is made within a short period of time your credit score could be affected negatively. This due to the fact that a record of the application is added to credit report whenever you apply for a card. Not considering the fact that your application was accepted or not.
The Number of Credit Cards owned.
Being in possession of many credit card affects your credit score. However, the exact number of credit card one is to have, without any effect on his credit score is yet to be known.
Keeping Your Credit Cards for a Long Time.
If you have managed your credit card properly for a long especially with good payment history, it will reflect on your credit score. You can also use your old credit card on a regular basis to help boost your credit score but, you should be mindful of the latest credit card deal. It interesting to note that with a good credit score, you can be approved for a better credit card with good terms and rewards.
Nevertheless, having your credit score unaffected negatively could be achieved if you have a credit card that is open and active, in good condition and with low balances.
