How credit cards can affect your credit score

Your credit score and your past credit history is the underlying factor which will either allow, or disallow you access to various credit and financial services.

Credit scoring can often be quite complex however the basics of the system are easy enough to follow, and the concept simple to grasp. Basically your dealings with credit are kept on record for a period of time – the most common is three years. During this time, the way in which you manage credit will be noted. Generally speaking, as a rough explanation, if you manage credit responsibly, you will have a better credit score. If you miss payments and have perhaps a rocky relationship or history in managing credit lines, then your score can be lower, due to these negative actions.

Dealing with credit cards and credit card companies can affect your credit score in exactly the same way as other lines of credit. These other lines of credit can include: mortgages and remortgages, loans – secured or unsecured, store cards and utilities such as telephone bills and water / electricity bills.

Here are some of the ways in which they can affect your credit score:

Multiple Applications

if you apply for many different lines of credit, this can adversely affect your credit score. The reasons for this are not altogether clear, but primarily it is because this gives the impression of desperation for credit, which is never a good thing for the lending companies. Lenders and financial institutions giving people access to finance want people to be able to pay off their borrowing without trouble (after all, this is how they make their money), not simply borrowing out of desperation. Applying for lots of credit lines can give a bad impression.

Too many lines of credit

whilst you can have many different lines of credit quite naturally, too many lines of credit can appear unmanageable, thus companies may be reluctant to lend further. However this may only negatively affect people with many, many lines of credit. The normal person can still have various borrowings without being a problem. For instance having a mortgage, credit card and even two loans is not uncommon.

Missing credit card payments

whilst the previous two factors can often affect the credit score marginally, missing a payment can be a big problem. Lenders want their money paid back without a hitch, but if you have missed payments in the past, this can be an indication you may do it in the future.