How Credit Cards Affect Your Credit Report

Last Update: May 22, 2020 Credit Cards Credit Report Debt

A credit card can affect your credit report in diverse ways. It is the customers’ usage of the card that determines the directions these effects will take. Increasing your score with the credit card is one of the outcomes.

These cards can weigh heavily on your credit scores. This is because they offer a great insight on how you can borrow. Rod griffin, who directs public education at Experian Company of credit scoring, says consumers determine the amount of money to charge every month. This gives a consumer a kind of free will, which is hard to find with other debt types.

Below is an overview of these outcomes.

  • Generally, a credit card serves well on your credit report.
  • The systems of credit scoring want to confirm your ability to handle the various kinds of debts.
  • They offer a mix containing debts that revolves.
  • Ability to back debts in installments.

Have in mind that 10% of your monthly FICO is the result of your own credit mix. FICO is a model of scoring that lenders use when trying to come up with a customer’s credit risk. Experian states that that those customers without credit cards are potential responsible borrowers. They can therefore create good credit report reports should they get a mixture containing other loan types. These may include provisions for mortgages as well as other car notes. If you would like to create a good mortgage profile using your credit, how can we go about it? The following steps are thus of importance to you.

  • Frequently confirm your credit status

Ultimately, the lowest rates on interest are any ones goal when securing a mortgage. For you to attain this goal, your credit status ought to be among the cleanest. Therefore, do not just fall in love with an online dream house before checking your credit status. Ask yourself, how am I going to attain it? This is just to make you feel secure with your financial ambitions. The credit reports are found at any out of the three main credit bureaus or by visiting The information provided therein is critical to potential lenders because it gives them an insight on your credit performance. It also offers them knowledge on your current debt standings if any.

  • Reduce the amount you owe

After confirming your credit status, you can now comfortably make decisions on how to carry on with your financial management. If you still got a carry forward balance on your card, it is about time you stopped this trend. Reduce on that amount you charge and prepare a scheme for earlier payment. This is because upon applying for a mortgage, your potential lender will have to confirm with an income ratio from you. This means that they compare your income with the debt that you owe. Mike Sullivan says that even though your income does not affect your credit report, potential mortgage lenders are still interested in it.

If you want to know the monthly payments that you can comfortably afford, go by the rate provided by banks. Most banks offer 28% of your gross income to mortgage repayment. Have in mind that your lender must have a load of information on a customer’s spending habits and other miscellaneous living expenses before giving out a mortgage. Therefore, should you be having a nagging debt on you neck, clear it out using an APR highest for you to drastically reduce what you owe.

  • Stop major activities that relate to credit

Having in mind that you are edging closer to applying for a mortgage, it only implies that you have to cut down greatly on your expenditure. Limit on those big purchases that you frequently make and focus on the mortgage that is ahead of you. You are advised not to change your career because this may pause a potential risk to the lenders. Better stick to what you are doing to gain confidence from your lenders . They believe that swapping employments is likely to be an impediment to your mortgage repayment.

  • Take time to correct your credit weakness

The essence here is to make your credit and general financial health to be at its strongest levels. Take time to discover opportunity areas. Moore, a financial expert says “for example, if bills have been late in the past or if there is something late now, figure out how to bring past due things current and keep them current. Having that pattern of paying bills on time is key”. Make sure you correct credit mistakes ever made in the past for you to adjust and switch you mind to buying a house. Tidying up all other areas that affect your financial report is also key. Issues like divorce and child support should be solved amicably because they might come back to haunt you at this critical time. Make sure that you have all the paperwork concerning such like issues in your possession.

  • Review your spending and start saving

You are in the process of acquiring a home and for your dream to be realized, you have come up with a budget stricter than before. This can be through revisiting monthly expenditures. The most important things to look out for are closing costs and down payments. Potential home buyers have no otherwise but to save for these two payments. According to your credit report, the amount of down payments  as well as closing costs vary significantly according to the type of house or home you want to see yourself in. Your credit report speaks for itself and there are instances of exception for those deemed as good payers.

There are several ways that credit cards can affect ones’ credit score. Since credit score is just like an exams’ score where one gets more points for answering question correctly. The question in the credit card world is, what good decisions are you making? Decisions have proved to affect the credit score either positively or negatively.

What Affects Credit Score Positively?

This question is very challenging to the credit card owners who usually find their score way below their expectations. Things that one should do or that affect their credit score include the following:

  • Stable employment.
  • Using a quarter or less of available credit.
  • Fully paying bills on time.
  • Make credit card accounts available so that credit history can be open for establishment.

Many credit score ranges from 300-900. So, the higher the credit score, better a person is. One can only secure a good credit if he or she is on the good ratings, that is 700 and above.

  • Stable employment

When one is in a stable and steady employment, he or she is able to pay bills on time and hence can enjoy better lending rates. The perception is that the person who is working enjoys constant pay and can get money to clear his or her debt on time. It assumes other responsibility that the man or woman is engaging in.

An employed person can service a loan on time, pay bill on time, and get to daily life without much fuss. A person who is an unemployed brings uncertainty of paying bills on time and thus it will affect his or her credit ratings.

  • Using a quarter or less of available credit

This may vary with experts and other people, but the best is to use a quarter that is 25% or less of the credit that is available. The explanation to this is that if one has a credit limit of $100,000 then he should use $25,000 or less.

  • Paying bill on time

Bills are debt and when you pay the bills on time, it will increase the credit score. Paying bills on time account to up to 35% of total credit score. Therefore, when one delays or defaults the bills his or her credit score gets hurt.

  • Make credit card accounts available

A person may want to close his or her credit card account because it has become negative. Closing a credit card account that has a balance can hurt ones credit score especially when the lender stops reporting ones’ credit limit. When one closes a credit card account, a credit company reports that his or her credit limit is $0. It is thus advisable to have credit card account open for history establishment.

Tips on How to Increase You Credit Score

These are the tips on how one can increase his or her credit score. They include:

  • Making sure one don’t skip paying other debts

Other debts that can count and affect your credit score include even parking fees. The government can notify ones’ creditors of unpaid debts that one owes them. This can include parking fees and unpaid fines and this will affect the credit score.

  • Do smart shopping using your credit card

One should be wise when dealing with financial matters. One should use credit cards wisely. Do this by avoiding too much debt as well as increasing credit score. Many people prefer using cash to credit card. When one stops using a credit card for six months then, his or her credit card company may stop reporting his or her progress to the credit bureaus, or they will terminate his or her account. When they do not report or when they terminate the account, it will affect the credit score negatively. To ensure this does not happen one should use the credit cards once in a while to make it active. One should use it to purchase small basic things or items. You can use it to pay for fuel in a gas station, pay for groceries and may be lunch or dinner in a restaurant. It should not be frequent but it can be in either after every two weeks and then he or she should make sure to pay the debt or balance in full when the statement is available to him or her.

One of the best tips of improving and maintaining a high credit score is to know more about the credit card. It is common to have credit card fluctuate, so one should not panic. Points may drop a little occasionally. Many reasons can cause this. Some of the reasons include; when one opens new account, when one inquires about the credit, or when a debt or balance increases. When one has a good credit picture it is advisable to avoid blunders such us closing an account and excess credit inquiries. When one follows this, he or she is striving towards high credit scores.

Negative Effects of Credit Cards over Your Credit Report

Various disadvantages come along with credit cards on the credit report. These effects include:

  • Paying your credits late.
  • Use of great amounts of money exceeding the limit.
  • Going bankrupt.
  • Getting many credit lines.
  • Charge through personal property.
  • Lack of employment.
  • Paying late credits

Late payment of credit cards is a common factor that affects ones’ credit report. It is very important to pay early for goods bought on credit. Debtors suffer a great debt due to delays on credit payments. This leads to financial problems resulting to huge amount of money spent extra to pay their debts or increase on purchase of goods.

  • Exceeding the limits

As goods and services are obtained on credit which is bound to be played, most people will go far to spend a lot having in mind long periods for due day. They forget that paying back is the greatest task for any credit cards. Most people spend much after paying previous credits and getting more credits because their minds are set for paying later.

  • Going bankrupt

Getting services on credits requires enough thought and decision. The state of money in your account will affect greatly on paying credits. It affects greatly in the account that one goes bankrupt because credits comes with interest. Going bankrupt may subject one to a great debt if he does not pay on time

  • Getting many credit lines

Many credit cards use affect a lot in the credit report. The report indication will affect as it shows the number of credit cards one owns. This will portray an image that one has lots of debts and money crises. Hence, this will lead to limits on obtaining more credits.

  • Charge through personal property

If a person obtains cash on credit and delays to pay, the source to pay debts is property depending on the agreement made. It is a difficult situation and more is money needed to replace the lost property. The property may be in form of land, cars, or even houses. Credit cards report will always click to show the debt one owes.

  • Joblessness

It is hard for jobless people to pay credits. In a situation that one loses a job and having credits, payment is difficult. This affects a big deal as one goes through debt. It is important to have savings in case of such a situation.

Few other Factors

  • Identity theft

It is always important to keep secrets of details on your credits accounts. Revealing information may cost a huge deal. Some people who have information about credit accounts may hack and damage it greatly. This will delay payments and great debt encounter.

  • Unsolved credit reports

Reports on credits account may have errors compromising your credits. A solution is much important to relieve one from unnecessary debts. Credit reports that are not solved affects greatly subjecting one to debts. One should ensure the reports red matches the credit accounts.

  • Check list and records

It is important for people to record the details about the credit accounts. As much as people use credits, recording is a mandate to provide evidence. Lack of keeping records of your account statements may lead to unnecessary payments and benefits. It is a confusing exercise trying to prove credits of one’s account on lack of records and paying more than spent. It will also help one understand the dues owed to them and paying on time.

  • Accounts closure

Credit points are very important and closure of accounts leads to their loss. For accounts that are not on use, it is important to cancel them. While canceling accounts, it is important to pay debt in the first encounter. This is a great step to save the credit points.

  • Knowledge

It is important to have clear information about how credit cards work. Most people who do not understand credit cards facts end up in great debts. Having instructions for beginners should empower them. It is important, as every record on the amount of your credits posts on your account.

  • Many credit cards

Credit cards use purpose depends on people’s needs and expenses. Some people will go for credit cards with no good reason just to experience and experiment. It is wrong not to have a draft of your intended purpose on the credit cards. The purpose to serve you, need identified for proper planning. There are optional sources one can use to get credits varying with the need. If one has no good reason for the credits, they are advised not to engage in this process. Credit cards greatly affect credit scores depending on intended purpose. Knowledge on use of credit cards will always add you more points on the credit report.



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