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Credit Cards and Your Credit Score

By Brian Anderson
Published: Saturday, October 31st, 2009

Credit scores are used by financial companies like banks to assess if a person is “creditworthy”, or simply, able to pay off debts. That is why whenever applying for a financing, mortgages, or any other kind of loan, the term credit score creeps up. There are a lot of factors that can affect your credit score such as payment histories, outstanding loans, and state of current debts. Your credit cards, the number of, their respective balances, and your payments, can have a great influence on your credit score. Here are some credit score tips targeted on streamlining and optimizing your credit card use for a better credit score.

Credit cards are an extremely popular and useful financial device. Over the past decade or so, credit card use in the United States has increased. The entry of these cards into your wallet has become extremely easy nowadays. From the first one given to your by your parents, to the multitude given away by almost every big retail store, the number of credit cards you have can multiply rapidly. As you may have guessed this will have an effect on your credit score, and some credit score tips will surely help you control these effects.

One thing to remember is that credit cards are a part of your credit history. Like other loans like student loans, car loans, housing loans, furniture loans and the like, it will have an effect on your credit score. Therefore by making every payment full and on time, you can ensure that they have a positive effect on your credit score.

The number of credit cards you have will also have an effect on your credit score. The logic in this situation is that when you have a lot of credit cards, you can create a very large amount of high interest debt at a single time if you ever use all of them and max them all out at once. Though it might be highly unlikely in your case, banks, financial institutions, and credit bureaus, will probably not take that chance, hence a lower credit score.

Another important one of these credit score tips is concerned with the amount of payment you give. Most cards with balances will allow you to pay off only the minimum interest payment to avoid late fees. This is well and good but by paying off more of your debt rather than just the minimum, you can improve your credit score. This is because credit bureaus don’t only look if you pay your bills on time, but also look at how fast you can pay off and clear your entire debt. Keeping the minimum amount of balance on your credit cards will reflect positively on your credit score.

Also, using a debit card instead of a credit card may also help out your credit score. This is because your are reducing the amount of incurring future debts while demonstrating your capability to create and use savings properly.

These credit score tips can help you turn your credit card into a positive influence on your credit score. Be sure to take note of them before using your credit cards or getting a new one.

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