Written by Louis DeNicola
Published Sep 05 | 6 minute read
Credit cards can evoke strong emotions. Some people love credit card rewards and perks, while others worry about the high interest rates and potential to overspend. Regardless of your stance, you may want to learn how credit cards can help or hurt your credit scores. Especially because the ideal approach doesn't require you to pay any interest or fees—it's a myth that revolving a balance helps your credit score.1
There are several ways that opening and regularly using a credit card might help your credit scores.
1. On-time payments help your credit: Most credit card issuers report your account's information and payment history to all three major credit bureaus—Equifax, Experian and TransUnion. Making at least your minimum payments on time could help you build a long history of on-time payments and improve your credit scores.
2. They increase your available credit: A credit card's credit limit can increase your total available revolving credit amount. This can help you maintain a low credit utilization ratio, which is best for your scores.
3. They might diversify your credit mix: If you only have open installment loans, such as student, personal or mortgage loans, then a credit card could add to your credit mix because it's a revolving credit account. Having experience with installment and revolving accounts can help your scores.
4. Additional cards thicken your credit file: A “thick" credit file can also help your credit scores. Although lenders might have their own definition for thin and thick files, generally having more than five credit accounts (including both credit cards and loans) in your credit report is enough.2
You'll want to be cautious because credit cards could also hurt your scores in several ways.
1. Missed payments can hurt your scores: Late payments can hurt your credit scores. And if you stop making payments, the card issuer could send your account to collections, which might hurt your scores even more.
2. You might use a large amount of your credit limit: If you have a high balance on your credit cards, the resulting high utilization ratio can hurt your scores.
3. Applications can lead to hard inquiries: When you apply for a new credit card, the card issuer will likely request a copy of your credit report and a credit score. A record of the request, called a hard credit inquiry, gets added to your credit report and might hurt your credit scores a little.
4. New cards lower the average age of your credit accounts: Opening a new credit card can also reduce the average age of your credit accounts. A higher average age is best for your credit scores.
Applying for and opening a new credit card can affect several credit scoring factors, such as the age of your accounts and your credit mix. However, these are relatively minor factors compared to your payment history and current credit usage.
The most important thing to do is make your credit card payments on time.
If you miss a payment, try to catch up as quickly as possible. Although card issuers can charge you a late payment fee as soon as you fall behind, they won't report a late payment to the credit bureaus until you're at least 30 days past due.3 Also, the further behind you fall, the worse it can be for your credit scores.
Your revolving credit utilization ratio is the percentage of your credit limit that you're currently using. It can be a major scoring factor, and the utilization ratio of your individual credit cards and your overall utilization rate are both important.
Here are the basics:4
The tricky part is that credit scores use numbers from your credit report. These are often different from your cards' current balances because credit card issuers tend to send an update to the credit bureaus once every month, often around the end of your billing cycle.5
You might use your credit card throughout the month and have a $2,000 balance at the end of your billing cycle. At that point, the card issuer sends your credit statement and bill to you and sends an update to the credit bureaus. Your bill is often due around three weeks later. But, even if you pay in full, your credit report will still have the reported $2,000 balance.
If you want to use your credit card without hurting your credit scores, try to pay down the balance before the end of each billing cycle to maintain a low utilization ratio.
The timing also dispels the myth that carrying a balance is good for your credit score. A low utilization ratio is actually better than no utilization, as it shows you're using and managing your cards. But you can have utilization and still pay off your credit card in full each month to avoid interest charges.
You can use a credit card to establish and improve your credit scores, but how you manage the card is important. For the best results, try to:
You can request free copies of your credit reports from AnnualCreditReport.com, or directly from each bureau—Equifax, Experian and TransUnion. However, the reports don't always come with credit scores. If you want to track your scores, look into options from personal finance apps and financial institutions.
If you have a credit card from Synchrony Bank, you can view your VantageScore credit score based on your TransUnion credit report for free. Monthly updates help you track your score over time, and you can learn more about the factors that can affect your score and tips for improving your score.
READ MORE: Personal Finance 101: Credit Scores
Louis DeNicola is a finance writer based in Oakland, California. He specializes in consumer credit, personal finance and small business finance, and loves helping people find ways to save money. He also writes for Experian, FICO, USA Today and various fintechs.
1. DeNicola, L. Myth Busting– You Don't Need to Carry Credit Card Balances to Improve Your FICO Scores. myFICO. Published May 8, 2023.
2. White, J. How to Strengthen a Thin Credit File. Experian. Published June 1, 2020.
3. Medine, T. Late Credit Card Payment? Here's What to Do. Experian. Published April 18, 2023.
4. Luthi, B. What Should My Credit Utilization Ratio Be? myFICO. Published February 9, 2022.
5. Gerson, E.S. When Do Credit Card Payments Get Reported? Experian. Published March 22, 2021.