How do credit cards affect my credit rating?

Credit cards will have an impact on your credit rating either positively or negatively. Your payment history influences your score the most. A consistent payment of at least the minimum required payment has the most positive effect. Conversely, sporadic or late payments can result in a lower rating.

There are other factors that can influence your credit as well. They all have a degree of influence on your overall credit score (FICO).

Age of the credit card account

When your credit card line was opened carries an impact on your credit rating. The card you established first lends to your “days of trade” and establishes you as a borrower with a history.

Age allows for accounts to be viewed as established; a benefit over many “new” accounts.

Amount of available credit

There is not an exact science to this impact. Having open lines of credit with high available balances can negatively impact your score.

Even if you don’t plan to use the money, but just have an abundance available to you, it can appear that you could in-debt yourself beyond your ability to repay. Equally, if you have no available credit lines available to you, it can appear as though you don’t qualify for more.

Keeping a healthy balance of “emergency” lines available will vary with each person.

Credit “mix”

Having only unsecured lines (credit cards, student loans, etc.) with no fixed credit (home loans, vehicle loans, etc.) can have a negative impact to your score. This isn’t to say that ONLY having credit cards will impact you negatively. Having fixed credit accounts open and paid for, on-time, while having credit cards that are open, used and paid on-time can increase your credit rating.

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