How Credit Cards Impact Your Credit Score
Within a few short years of exiting bankruptcy, debtors are able to get unsecured credit cards again. But if the debtor wants to maintain a high credit score they need to be wise about how they use the credit card.
Below are a few tips on making sure that your credit card use has a positive impact on your credit score:
- Maxing out your credit card will have a negative impact on your credit score. When a potential lender sees that a debtor is using their credit cards to the max, they see a debtor who is already living on the edge and who is probably not ready for more credit. Also, maxed out credit cards bring down your credit rating by increasing your debt to income ratio.
- Paying off your credit card each month only to charge it up again will not improve your credit score. Let's take a look at how this works. If you have a credit card with a credit limit of $1000 and you charge $800 each month and then pay it off each month, you will still have a high debt to income ratio which is bad news for your credit score.
- Keep your usage of your credit cards low and you will reap the rewards of a low debt to income ratio which shows that you are not depending on your credit cards just to survive. The irony of the credit game is that lenders are more willing to extend credit to those who don't need it. If you want to win the credit game you must project the image of being one of the debtors who don't need the high credit limits and you will find that more lenders want to work with you.