Credit Cards and Your Credit Score
Many people aren’t aware of how much their credit score affects their lives until they try to buy a car or get a mortgage. A low credit score can even impact your ability to get a new job! If you’re ready to improve your credit score, one of the best places to start is with your credit cards.
Your credit score is made up of a variety of factors. They include things like how long you’ve had credit, whether you make your payments on time, and what types of credit you have. One of the biggest pieces of your score, though, is your debt to credit ratio. This is basically how much debt you’re carrying, especially in revolving credit like credit cards. Revolving credit can really harm your credit score because it’s volatile. If you have $10,000 limit, you could go and get yourself into $10,000 worth of debt without batting an eye. This makes you a risky customer, and your credit score is mainly an assessment of how risky you are.
One of the quickest ways to pull up your credit score is to fix this debt to credit ratio. Of course, the best way to do this is to pay down standing balances as much and as quickly as possible. Even getting to where your balance is less than half of your available credit will really help you out. Paying down your credit cards helps your credit score, but it also helps you remain financially healthy in the long run.
Another option is to ask for a credit limit raise on some of your credit cards. You have to be careful about this. If you ask too many companies for this, then you’ll take a credit score hit because too many companies will be asking for your credit report. Over the long run, though, it may be worthwhile if you can get even small credit limit raises. This helps improve your debt to credit ratio without your having to pay a single dime toward your debt.
You do need to tread cautiously here, though. If you have super high credit card limits without also having a super high income, you’ll end up with a poor credit score. Obviously this is a pretty big risk, and the credit bureaus will report it as such. Most people should have no more than one or two credit cards on which they have modest credit limits and carry small balances, if they carry any balances at all.
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