Understanding How Credit Cards Can Affect Your Credit Score
Saturday, 13 April 2024, 18:00
5 Ways Credit Cards Can Help -- or Hurt -- Your Credit Score
Credit cards can be a blessing or a curse, for a few reasons. If you overspend on your cards and owe interest, you could end up in a bad financial situation -- the average credit card interest rate is 21.47%, according to the Federal Reserve Bank of St. Louis. But if you pay your credit card bills on time all the time and earn rewards, they can actually help improve your personal finances.
Here are the ways credit cards can impact your credit score:
- Payment history: Timely payments boost your credit score, while late payments can cause a significant drop.
- Utilization ratio: Keeping your credit utilization below 30% is crucial for a better credit score.
- Average account age: Long credit history is favorable; avoid closing old accounts.
- Different credit types: Having a mix of credit types improves your score.
- Credit inquiries: Multiple credit inquiries can be detrimental to your credit score.
It's essential to manage your credit cards wisely to maintain financial stability and a good credit score.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.