You want to effect your FICO score for the best with credit cards. Your FICO score can determine what types of credit cards you qualify for, but your credit cards in turn can effect your FICO score, for good or bad. Your credit score is effected by many things, not just one, including the number of credit cards you have, credit card accounts you open or close, and even how often you apply for a credit card. It’s a difficult balance of factors that determines your score.
Effect Your FICO Score in a Positive Way
Credit cards are an excellent way to establish credit, which can raise your FICO score. Always pay your credit card bills on time, at least the minimum required payment, and never spend over your limit. These actions can show that you are credit-worthy.
Your balance-to-available-credit ratio can also effect your FICO score. This is the percentage of available credit you have compared to your overall credit limit: if you have a credit limit on your cards that totals $1,000, and you have $200 available credit, 20% of your credit limit is available. The higher the percentage of available credit is, the better. If all your cards are maxed out and you have 0% available credit, that will can be a determent to your credit score.
Negative Impacts to Your FICO Score
Having too many credit cards can reflect negatively on your credit score. There is no perfect number of credit cards to have, but don’t open additional accounts if you don’t really need to.
Every time you apply for credit, the company checks your credit score. The number of credit inquiries you have isn’t a major factor in determining your credit score, but it does lower it. If your credit report shows you are applying for multiple forms of credit, that can cause the credit card companies to worry.
It can make great sense to consolidate your credit cards, especially to a rewards card or a card with a special introductory rate. But don’t close the old accounts. You want to limit the number of cards you have, but in this case the effect to your balance-to-available-credit ratio will suffer more (and impact your score more) if you close the old account.