Can a Credit Card Improve Your Credit Score?

 

 

Using a Credit Card can have either of  positive and negative effects. They may have the power to bury you under the pressure of immense debts, but they can also create wonders in your life by potentially improving both the credit report and credit score. But that can only happen if the dues incurred from credit cards are cleared at the time. If they are not paid handsomely and in time, then they will not only make the credit score worse but also put one under the pressure of debts. 

Credit scores are essential decision-making tools that lenders use while lending money to understanding how likely the person will repay the loan. A good credit score opens access to bigger loans. 

Having a credit card is a responsibility. So people having credit cards have to be conscious when they are using credit cards and why they are using the credit cards. They should swipe their credit cards to only make those purchases that they can afford to pay later in the given timeline. Most importantly, one has to be mindful of how having credit cards can impact their credit score. Everything they do with their credit card can affect their credit score - from applying for a credit card to using the credit card - and even how they are using the credit cards - or how many credit cards they already have. 

Ways to Improve your Credit Score with Credit Cards?

For people who own one or more than one credit cards, they should most importantly know ways to improve your credit score with the help of credit cards.

1. Credit Limit & Balance Information: Most of the credit cards have a credit limit, which is the maximum credit or the maximum amount, the credit card issuer has made available to you. Using all the credit cards at once lowers the credit cards and makes the person a risky borrower with less creditworthiness. Many credit card issuers report a ‘high balance’, i.e., the highest balance ever charged on the user’s credit card. That’s why, even if the user reached the highest credit limit but paid that off soon in the given timeline, still the high balance will reflect in the credit report affecting the credit score. It’s always safer to keep the card balance below 30% of the credit limit, instead of exhausting all the credit limit and reaching the highest balance.
2. Monthly Credit Card Payments: The last credit card payment amount is always listed on the credit report itself. Even though the credit amount directly influences the credit score. Quick and timely payments can reduce the credit balance faster and will improve the credit score. The timeliness of credit card payments is one of the most critical factors that can influence the credit score. Credit card payments at the right time can boost the credit score, while late overdue payments can reduce the credit score and reflect less creditworthiness. In case of late payments, there’s another disadvantage that a late payment fee adds up to the already due credit balance. But your credit score can be safe only if you pay the credit card bills every month, i.e., in the 30-days time limit. Just like an electricity bill or phone bill comes every month and the credit card bill also comes every month with a due date and has to be paid before the due date only if you want to keep a good credit score.
3. Credit Card Applications: Each time someone applies for a new credit card, the details get added to their credit report. Rejections of credit card application have a negative  impact on credit score. Putting several credit card applications in a short amount of time shows the desperation for external funds and makes you a risky borrower . For this reason, it’s best to avoid applying for too many   credit card applications in a short span of time.. 
4. Several Credit Cards: Having too many credit cards can affect your credit score. There’s no exact limit of possessing credit cards, but too many can affect the credit score.  
   
   
    

Other than all these factors, if the person doesn’t have a credit card at all, if that can affect the credit score negatively. So it’s always essential to have one credit card at least which should be appropriately maintained. 

Final Words

The longer one can keep maintaining credit cards correctly, the better it is for their credit score. It’s always good to use the credit cards responsibly and keep the credit utilisation within 30% of the credit limit to maintain a good credit score. But also one should make sure they pay their bills timely and swipe the card only to make those purchases that are affordable for them. The key to keeping a good credit score with the help of a credit card is to keep them active and pay bills on time, with a low outstanding balance.