Credit Cards and Your Credit Score: How They Relate

FEB 05, 2014

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For many people, having a credit card is their first experience using credit of any kind. Credit cards are the workhorses of the credit world, helping consumers finance everything from gas to flatscreen TVs.

You may be aware of how useful credit cards are, but how well do you understand the relationship between credit card use and your credit score? While there are different credit scores, one thing is for sure, it wont be in good standing if you misuse your credit cards. If you’re unsure where you stand, here’s a closer look at how credit card use impacts your score.

The Good

Smart use of a credit card can be a good thing for your score. A credit card can help you:

  • Build a good payment history. On-time payments can contribute positively toward your credit score
  • Improve your ratio of credit available to credit used. Keep your balances low depending on the scoring model, using less than 30% of your limit could be beneficial for your credit score.

The Bad

  • Credit cards charge interest, so if you fail to pay off your card every month, youll wind up owing more than you originally borrowed.
  • Missing payments or paying late can drag on your credit score.
  • Maxing out your cards can skew your credit utilization ratio.

The Downright Ugly

  • Credit cards require self-discipline in order to avoid overspending. If you fail to see your credit card use as actually spending money, you can quickly find yourself in debt.
  • Late or missed payments can also trigger a significant increase in your interest rate.

If you have cash on hand, it might be better to choose paying for your purchase right away, rather than paying with plastic. But if youre confident you can balance the responsibility of credit card usage, there could be some real benefits.

Consistent payment of your credit cards can contribute to a solid credit score. And just as much potential to harm your score if you dont use them carefully.


This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc., an Experian company.     © 2014, Inc.   All rights reserved.