Using Credit Cards to Boost Your Credit Scores

Learn how Credit Cards can help your Credit Score.

About 10% of your credit score is based on the variety of credit that you use. For the best results you need to show that you’re capable of handling more than one credit account, but does the kind of credit matter?

Yes, it does. Creditors like to see a home loan or a car loan in addition to a credit card. And the type of credit card does matter.

The FICO scoring algorithm treats bank cards as being more important than retail store cards. It doesn’t matter if your credit card is issued by a big bank or a credit union, however.

As long as you do have some kind of revolving account – such as a department store card – you can still earn a score in the 700’s. But wise use of a credit card that can be used everywhere cards are accepted will gain you a few points in this scoring category.

If you’re trying to build or rebuild your credit, the good news is that secured credit cards count as much as unsecured cards. These credit cards are all treated equally on your credit report. So if that’s all you’ll qualify for at this point, it will still help you.

Another 10% of your score is made up of new credit and new credit inquiries. If you’re working toward higher scores, you should refrain from asking for more than just the one bank card that you need to raise your scores in that category. Additional inquiries will lower your scores.

Next in importance, at 15%, is the length of your credit history – so never cancel an old credit card. Keep it, use it occasionally, and pay the balance when your statement arrives.

The amounts you owe relative to the credit available to you makes up 30% of your score. This is why we stress never using all your credit. Experts say to keep your use under 30% – and staying under 10% is even better. That excess credit available to you should be kept in reserve for emergencies only!

Finally, the largest factor is your payment history, at 35% of your score. Paying every bill on time is the single most important thing you can do to assure a high credit score. So create a budget system for yourself that ensures that you have the money available when those bills are due.

Planning ahead for those due dates will not only help you raise your credit scores – it will save you money. At $39 every time a payment is late by even 10 minutes, penalty fees can create a serious drain on your bank account.

One Response to “Using Credit Cards to Boost Your Credit Scores”

  1. Katrina says:

    This is correct not only the way you use your credit, the type of credit mix you have as well as the type of creditors you loan you money – all contribute to your credit score.

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