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The Secrets about Credit Cards and how they affect your Credit Score
The first thing to understand about how credit cards affect your credit score is, your score is only affected when the company issuing the card reports to one of the three major credit bureau's, these being Equifax, TransUnion, and Expirian. Most Issuing banks report to all three however a few secured credit card companies do not. If you are looking to rebuild your credit by means of a secured credit card then it is important to find out if the issuing company is reporting to the credit bureaus.
Why some are considered Risky Basically in the eyes of the lending institution if you are always using all of your available credit then you fall into a group of people that might be over extending themselves and according to history people who over extend them selves have a greater likelihood of defaulting on money they owe, thus if you put yourself into this group your score will go down. Although the above is true there other factors, for example if you have too many credit cards then you could be seen as having the ability to be at risk in the future if your income or capacity to pay is not equal to your credit limit. And if you don't have any credit cards than you are not establishing credit history at least not with credit cards.Watch out because this can hurt you Many credit card issuers allow card holders a grace period. This means that if you pay you bill every month in full you will not be charged a percentage rate or APR. If you have a card with a credit limit of ,000 and every month you charge ,500 but you pay it off every month in full you will avoid finance charges but it could be hurting your credit score why. Because when credit card issuers report to you credit report all they report is how much you owe and that you pay on time not the fact that you pay your balance in full each month. So on paper it looks like you always have a balance of ,500 and that you never pay it off. It might be wise to switch between cards every few months so that you can show a balance of zero from time to time, this will help your credit score. And if you are planning to buy a house, pay off your credit card balance a few months in advance so that you have a good debt to available credit ratio as this could save you tens of thousands of dollars over the course of time on your mortgage.©2006 Parker Publishing About the Author: Author Hugh Parker journalist for www.creditcardumbrella.com
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