In modern society, credit card have become an indispensable payment tool for many people in their daily lives. At the same time, credit scores, as an important indicator of personal credit status, also play a key role in various financial activities such as loans, car purchases, and house purchases.
A credit score is a digital score that predicts a person’s ability to repay a loan by evaluating their credit history. The score ranges from 300 to 850, with higher scores indicating better personal credit and easier borrowing and obtaining financial products such as credit card.
How do credit card affect your credit score?
As a major credit tool, the way credit card are used directly affects personal credit scores. The following is a detailed analysis of how credit card use affects credit scores:
Payment history is one of the most important factors affecting credit scores, accounting for about 35% of the score. Credit card repayment records on time will directly affect personal credit scores. Every failure to pay in full on time or overdue will be recorded in the credit report, and the longer the overdue period, the greater the impact on the credit score.
Credit utilization refers to the ratio of used credit to total credit limit. Generally, keeping a credit utilization ratio below 30% is considered ideal, as a high credit utilization ratio indicates that the borrower may be under financial stress and therefore has a negative impact on credit scores.
For example, if your total credit limit is $10,000 and you have used $5,000, your credit utilization ratio is 50%. Maintaining a high credit utilization ratio over a long period of time may make you look like a high-risk borrower, resulting in a drop in your credit score.
The length of your credit history refers to the total length of time you have had credit accounts . Having a longer credit card history is usually beneficial to improving your credit score because a long-term good credit record can enhance the credit institutions’ trust in you.