How you use your credit cards will affect the credit scores from TransUnion, Equifax and Experian. Everything you do with your credit card will be reflected in the credit bureaus’ scores, so if you are using your credit cards most responsibly, expect to see high credit scores the next time you pull your credit score and reports.
The following are some of the most important ways that your credit card use is affecting your credit scores:
Your Credit Limit
Your credit limit is the amount of credit that your credit card issuer approves you to borrow. In other words, it is the amount of money that you are at liberty to charge to your credit card. For example, your credit limit may be $2,000, and if you make changes for $2,000, lenders will think you are at high risk. Your credit score will also be very low because of it.
In some instances, credit card issuers will report the highest balance you have ever charged to your credit card. You may have charged this amount because you knew you could pay it off, but your credit report will have the words “high balance” printed on them, and lenders do not look favorably on this. Instead, experts advise people to keep their purchases under 30% of their credit limits, never to appear to be irresponsible borrowers.
The Number of Credit Cards
If you have too many credit cards, this lowers your credit scores, and the number that qualifies as “too many” is a well-kept secret.
Long-Term Credit Card Accounts
If your credit cards have been open for an extended period, this is good for your credit scores. If you have old credit cards, don’t close them. Also, try to use the old one every once in a while. If a new credit card offers you a great deal, make sure you apply for it. You may be able to qualify for cards with great rewards and better terms now that you are older.
Credit Card Payments
Your creditors will report your last credit card payment, but this previous payment doesn’t affect your credit score. However, it might affect it indirectly. For example, if you are making large payments to your credit card issuer, this causes your balance to go down faster, and it increases your credit scores.
Making your monthly payments also determines what your credit scores will be. For example, if you are making your payments on time every month, this will lead to high credit scores, and if you are making late payments, your credit scores will go down.
In most cases, a late payment will not be reported to the credit bureaus until 30 days late. Paying your card issuer late can mean that you will have to pay a late fee, but it shouldn’t affect your credit scores if you pay it before the 30-day deadline.
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