At a Glance

Your credit score is calculated using the information on your credit report, indicating the likelihood that you’ll pay back money loaned to you.

Every month, your credit card issuer reports your account activity to one (or more) of the three major credit bureaus (Experian, Equifax, and TransUnion) to be included in your credit report. That means everything you do with a credit card affects your credit score, including not having one.

In this article, you’ll learn:

Your credit limit and balance information

Your credit limit is the maximum amount of credit your card issuer has made available to you. After the implementation of the CARD Act in 2009, card issuers cannot open a credit account or increase a credit limit for a consumer unless they consider the ability of the consumer to make the required payments.

So, issuers will check your credit report and gross annual income to determine your credit limit.

It’s recommended to keep your credit card balance below 30% of your credit limit. Even if you have available credit, using too much and getting too close (or over) your credit limit makes you look more risky and your score can decrease. And even if you max out your credit card but pay it off, your credit report can still show a high balance.

Credit utilization ratio

Your credit utilization ratio is how much credit you’re using of your available credit. This is essentially the percentage of how much you’re using compared to your credit limit (credit used vs. credit available.) Credit scoring models often consider your utilization ratio when calculating your score, and they can impact up to 30% of your score (depending on the scoring model).

Low credit utilization shows you’re using less of your available credit, a good indication you’re managing your credit well. It’s recommended to keep your ratio below 30%.

Monthly payments

Your monthly payment amount and the timeliness of your payments both impact your credit score:

  • Your balance relative to your credit limit is included in your credit score, so larger payments that reduce your balance faster can boost your score. This is why experts recommend paying off your balance in full each month (vs. just the minimum payment).
  • On-time payments are one of the biggest factors when calculating your credit score, while late payments can significantly hurt you.

However, in most cases, late payments aren’t reported to the bureaus until they are 30 days late, so while you may have a late payment fee, your score may not be impacted if you make the payment sooner than 30 days past due.

How long you have held a credit card

Length of credit history, or the age of the accounts on your credit reports, makes up 15% of your FICO score. The longer you have your cards open, the better (especially if you have a positive payment history and use them periodically and responsibly). It’s important to keep the cards open and active, in good standing, and with low balances.

Note that if you have good credit, you may qualify for a credit card with better terms and/or rewards, so keep an eye out for upgrades or new cards you can open.

Credit card applications

Whenever you apply for a credit card, submitting the application triggers a hard credit inquiry. This inquiry goes on your credit report and can lower your score by a few points; however, applying for several cards in a short period of time can hurt your score even more.

Try to avoid submitting multiple applications. Instead, do research and compare card options ahead of time to ensure you’re choosing the right one for you and one that you qualify for.

The number of credit cards you have

Having no credit card can hurt your score because you don’t have any way to actually build credit. If you don’t have any other active accounts on your credit report, you won’t even have a credit score, which can make it difficult to qualify for financing. Getting a credit card can help you establish and build your score (if used responsibly).

On the other hand, having too many cards can also hurt your score. It’s not quite sure how many cards influence your score, and it likely varies from person to person, but having too many open lines of credit can make you look riskier to lenders. If you have multiple cards, it’s important to manage the balances on all, make payments on time, and otherwise use them responsibly.

Related: Do More Credit Cards Help Your Credit Score?


Yes – without open, active accounts on your credit report, you won’t even have a credit score. This can make it difficult to get a loan or other financing. Credit cards are one of the easiest types of credit accounts to get, which makes them a good option for establishing and building a credit history.

Applying for a credit card triggers a hard inquiry, which can lower your score. Missing or making late payments can have a significant impact, and maintaining a high credit utilization ratio can also do damage. Closing a credit card can increase your utilization ratio and decrease your age of credit, which can hurt your score.

Improving your credit score takes time. However, as soon as the issuer starts reporting to the credit bureaus (typically after 30 days) you’ll start to see an impact on your report. Continuously making on-time payments and keeping your credit utilization ratio low are two of the fastest ways to raise your score.

Closing a credit card will affect the age of credit and your credit utilization ratio, but the level of impact depends on how many other cards you have. If you have multiple cards, there won’t be as much of an effect. However, if you don’t, your credit utilization ratio can increase which can lower your score.

Learn more: Does Closing a Credit Card Hurt Your Credit?

If you are a corporate card cardholder, your credit will likely not be affected. The issuer may check your credit before the company gives you a card, but the activity on the card is reported on the organization’s credit report, not yours.

As long as you make payments on time and keep a low credit utilization ratio compared to your credit limit, responsibly using a credit card can help improve your credit score. Your credit mix also may improve, which positively affects your score.