Is a Credit Card Good or Bad?

Sunday, 30 January 2011 00:35

Believe it or not, having active credit cards is a very good thing for your credit scores.  Of course one should use good judgment in using a credit card so that balances are not out of control.  Actually 30% of your credit score is based on the relationship (percentage) of the balance compared to the high credit limit.  The lower the percentage, the better the credit score.  I hear so often the statements:  “I am going to close all of my credit card accounts, I will lower my credit limits, or I don’t want a credit card”.  These could all affect one’s credit scores in a negative way.  A good mix of credit is important in credit scoring which includes having these revolving lines of credit.  Just think if a credit limit is lowered from $5000 to $500 how easy it would be to “max out” the credit limit which would be bad for a credit score.  It would be better to keep higher limits and keep the balances down as far as credit scores are concerned.  If building credit is needed, obtaining 1 or more credit card accounts would be paramount because you are giving up valuable points in credit scoring if the bureaus do not have revolving accounts to grade.  Even if you have credit issues there are companies that still offer credit lines.  To learn more, give me a call.  We are here to help you.