Directory Image
This website uses cookies to improve user experience. By using our website you consent to all cookies in accordance with our Privacy Policy.

The Impact of Your Credit Card Account on Your Good Credit Score

Author: John Smith
by John Smith
Posted: Aug 24, 2016

After applying for a credit, Card issuers run a background check on your credit. When you have a good credit score, you are more likely to pay your bills and the lower rate you will get on a new card.

Doing so many inquires within a short period of time can reduce your good credit score due to reports that people who are in need of loan are more likely to get into financial trouble than those who are not. Open a new credit account could only cause a temporary drop in your score. This could only make a difference if you are making a major purchase such as a house or car within that period.

Sometimes a new account could also have an opposite effect. One factor that determines your score is the amount of debt you have relative to the amount you have which is known as credit utilization ratio. The less available credit you use or the lower your credit utilization rate, the better it is. This implies that if you have $500 in card debt and a $1,000 total credit limit, your credit utilization ratio is 50 percent. However, if you open another card account, which raises your total credit limit to $2,000, your utilization ratio drops to 25 percent, which could help your score.

After digging yourself out of credit card debt you will most likely be tempted to close a good credit card account you stopped using to avoid facing such issues again. But this could have a greater effect on your good credit score. If you don’t trust yourself with a good credit card the best solution will be to dump the good credit card or hide it in a safe deposit box that you can’t easily locate instead of closing your existing card account.

Though a card can be a powerful financial tool, they have the potential to damage your score if you use too much of what's available to you.

The amount of debt you carry accounts for 30 percent of your FICO score. It also has a big influence on the VantageScore, a scoring model created by scoring companies TransUnion, Equifax and Experian. If you can't pay your good credit card balances in full from month to month, try to keep your balances as low as possible, when you get up above utilizing more than 30 percent that begins to hurt your score.

About the Author

Read complete information carefully, as it is really going to help you build a good credit score very easily.. Visit here https://www.goodcredit.com/

Rate this Article
Leave a Comment
Author Thumbnail
I Agree:
Comment 
Pictures
Author: John Smith

John Smith

Member since: Aug 24, 2016
Published articles: 2

Related Articles