Credit cards are typically the simplest form of credit to obtain, but they offer both risks and benefits when it comes to your credit score.
How Credit Cards Can Lower Your Credit Score
If you have too many credit cards, your score may lower. Typically 3-4 is a good number of cards to have. More than that and you may be showing lenders that you have the potential to be irresponsible with your spending. Also, be careful about opening too many credit cards too quickly, or swapping out older cards for newer cards with lower interest, as this can result in a reduction of the average age of your accounts.
Your spending habits with your credit cards can have the greatest impact on your credit score. Late or delinquent payments will lower your credit score and serious delinquencies may cause the credit card issuer to close and even charge-off your account. Also, having too high a balance with relation to your limits will decrease your score. Use your cards to demonstrate responsible spending, but try to keep your balance under 35% of the limit.
How Credit Cards Can Raise Your Credit Score
If youre looking for a quick boost to your credit score, often opening a new card will result in an increase. This is especially true if you have only a couple of accounts, accounts with low limits or no credit cards. Another way to boost your credit with credit cards is to ask the credit card company to increase your limit. Higher limits will lower the percentage of debt to available credit and demonstrates to creditors that you are a responsible spender. Furthermore, paying your accounts on time every time will gradually improve your credit score.
