Credit cards are like double-edged swords when it comes to your credit rating. All financial advisers agree that people who use credit cards to shop and pay other goods and services stand a risk of having an enormous credit score drop.
However, it all depends on how responsible a person is when using the card. If you check the credit rating tips on Boostcredit101, you will realize that the emphasis is on taking charge of how one uses the credit card rather than eliminating it all together. So, let us look into details how owning one affects the credit rating on your file.
High Credit Card Balances Impact
One of the managers at a known credit score consultancy firm cautions people against running very high credit balances at all the time. This means that you have a large debt and should anything happen to the source of income, you will suffer a large blow on credit rating.
In fact, some credit bureaus automatically lower the credit rating of people who heavily use their credit rating every month. The fact that you have a high credit limit does not mean you exhaust all of it every month; use only what you need.
Running Multiple Credit cards Impact
Some people have a couple of credit cards from different lenders. While this may sound cool and safe for you, it will also lower the credit rating. One thing to remember is that the usage of each has a negative impact and the combined impact is massive.
There is a high chance of falling into conflicts with one of the credit card companies, which can result in further damage if they report you. It is better to run only one credit card from a reliable lender.
Opening New Credit Card Accounts
If you want to add one more credit card to your stock, it is advisable that you do not make many inquiries within a short time. The lenders will seek your credit history report and the bureau will lower it if they detect too many reports drawing from your account.
It is better to go straight to one financing institution and open the account. As mentioned above, do not run too many credit card accounts simultaneously as this will further damage your rating.
Repayment of Credit Card Debts
As much as the lenders try as much as possible to automate this option, beneficiaries still have the option of deciding whether they will pay or not. Some people repay the money they owe to credit card companies late while others default altogether. There is a great danger in this as they will report you to the bureau and damage your score.
On the other hand, making the repayments early has a positive impact of increasing your score. The best thing is to ask the credit card company to submit your report to the bureau to improve the rating.
As mentioned from the beginning, you can either improve your rating or drop it. From the above highlights, we see that there is a higher risk if affecting the rating negatively. Therefore, it is better to avoid using the credit card where possible.