How Your CreditCard May Be Hurting Your Credit Score When it comes togetting a good credit score, your credit cards can either affect you negativelyor positively. There are three main things that can damage your credit report;having too many credit cards, going over the limit of credit cards and having longoverdue credit card debts. Let’s examine them one after the other.Having too manycredit cards Opening more thanone credit card account within a short timeframe can negatively affect yourcredit score. It won’t only bring about a drop in your credit score, but cardissuers may think that your financial condition has changed. So you should onlyapply for what you need.
However, if youthink you have too many credit cards, the most awful action you can take is tostart shutting down some credit cards without considering the effect it willhave on your credit score. You cannot help your score by closing credit cards. Going over thelimit of credit cards Most credit cardsalways have a limit, which is the highest amount of credit that is available toyou. Despite the fact that your cardissuer has given you a specific limit for your card, it looks awful if youexhaust all the credit.
Exhausting your credit card, making use of all creditavailable to you, makes you look like an irresponsible borrower and your creditrating or score will be hurt badly due to it. Long overduecredit card debts Repayment historyis one of the main factors that add to your credit report. Every time you aredelaying the payment of your credit card debts, this has a negative way ofaffecting your credit report. Always remember that the amount owned by a personis the second most important factor in the FICO/credit report. It accounts for30% of the report. Both creditdefaults and late payments negatively affect your credit score, but creditdefaults are likely worse since details of the long overdue debt are notusually removed erased from the credit history even after making payment forthem. This can definitely bring down your credit score for the time being andkeeps on having some impact as long as it stays on your credit report. Ways to preventyour credit card from hurting your credit scoreGiven below aretips to know how to use a credit card without getting into difficult debts andthat way keeps a healthy credit score.
1. Pay off theones with the smallest balancesIf paying downdebts with high interest isn’t comfortable for you to start with, try payingoff the ones with the smallest balances. Begin with the credit card that hasthe smallest balance and makes additional payments towards it each month. Keepon paying the minimum on all other credit cards. Immediately you settle thesmallest balance, proceed onward to the credit card with the next largerbalance and do the same process. This techniquemakes you feel great paying off all your debt quickly, no matter how small thebalance might balance.
2. Don’t goover 75%-90% of the credit card’s limitThe more yourcredit cards, the more you are able to charge. You might have goodself-control, yet it is better not to entice yourself by going over 75%-90% ofyour credit card’s limit. Reduce the number of credit cards you have in orderto maintain a strategic distance from credit debt and therefore improve yourcredit score. 3.
Treat yourcredit card as a debit card and pay in full your bill every monthIf you want to stayaway from credit card debt issues, you need to treat your credit card as adebit card and pay off your bill each month. With that, you will not have tocarry a balance over and totally wipe out the danger of getting soaked intodebt. You never need to stress over whether you will be able to meet the leastpayment since your credit card debt has already been fully settled.
4. Use yourcard for big transactions and not small ones you can easily forgetTaking the time toconfirm each transaction will ensure that you are not on the snare forfraudulent activity. If you want to easily remember all the transactions youdid, then you should use your card for big transactions rather than the smallones that you will easily forget. 5. Always checkyour credit card statement, keep receipts, mistakes to look for on cardstatementsIf anything in yourfinancial record looks a bit sketchy, check your credit card statement forvital information and consult your card issuer to discuss any mistakes you mayhave found such as wrong charge or fee.
15% of the credit card accountstatement have mistakes, so do not make payment for a mistake you did not make.Even if there is no mistake in your credit card statement, you need to stillreview the rest of your account statement. ConclusionUsing credit cardsimprudently can hurt your credit score, but that does not mean credit cards area bad tool. In fact, appropriate use of credit cards might boost your creditscore/records without you taking on extra debt. While specialistsrecommend that you keep your credit card usage below 30%, it is essential tokeep in mind that creditors are also interested in the total amount of your remainingcredit. This implies that if your credit limit is low, it’s not really an issueif your credit card usage rate is somewhat higher than recommended. Reference links:http://www.investopedia.com/articles/personal-finance/082516/why-too-many-credit-cards-can-hurt-your-credit-score.asphttps://www.nav.com/blog/credit-card-could-hurting-your-business-credit-scores-22213/http://www.creditcards.com/credit-card-news/how-credit-cards-impact-credit-score-1270.phphttps://www.thebalance.com/using-credit-cards-4073400