Credit score consists of things like your credit history, current debt, payment history, and more. Credit bureaus assigned credit scores on the basis of the information furnished by the lenders. Your credit score is a history of loan accounts as well as credit cards.
It assists other credit providers to judge your ability to repay the loan amount you are looking for. So, read this article properly to understand how credit cards affect your credit score. Credit score factors are the following below:
Also Read: How To use credit card wisely
Having a Credit Card
Credit cards play an important role in building a credit score. If you do not have a credit card or active loan accounts, you will not have a credit score. Having no credit card can be barricaded when you apply for bigger loans such as personal loans, car loans, or home loans.
Your Available Credit Limit
The bank sets the credit limit after studying your financial status. There is a point where you cannot cross that limit, if you spend above the set limit then you could have to pay high charges that can hurt your credit score.
Several credit card providers also keep a record of the “highest balance” ever charged to your credit card. Although you pay your bill on time your credit record can reveal your high balance
Your Overdue Balances
Overdue balances on your credit card have a negative impact on your credit score. Because payment records affect the credit score, if you miss a payment or have an overdue balance, in a result your credit score will be lower.
Number of Credit Cards
There is no boundary to getting a credit card. Most people keep 2-3 credit cards depending on their requirements. There are many people who have more than 6-7 credit cards considered credit-hungry borrowers. Having too many credit cards also affect your credit score.
Closing Your Credit Card Account
If you close your credit card account, that can hurt your credit score. Because credit history plays a better role in your credit score. So, if you close your account which has been for long period, it means you going to erase your credit life.
Transferring a balance can result in a “hard inquiry” on your credit report, which can temporarily lower your credit score. Hard inquiries occur when a lender checks your credit report as part of a credit application.
They may be more common when you are applying for a new credit card or taking out a loan, but they can also occur when you transfer a balance from one credit card to another.
Your credit cards and other loans you have are directly connected to your credit score. If you want to make a good credit score, pay all loans EMIs regularly. Pay your total fund due on a credit card each month and keep below the utilization limit of 30%.