Resist the Urge to Max Out Credit Cards

Credit card usage is the most common loan activity and the No. 1 thing that affects a person’s credit score.

Matt Lynch, director of marketing for MembersAlliance Credit Union, 2550 S. Alpine Road, says there are more than 364 million open credit card accounts in the United States and the main reason is pure convenience.

“Credit cards are a convenient way to make purchases, but they’re still loans, and depending on how you handle them, you can drastically improve or impair your ability to borrow more money when you really need it,” he says.

A rule of thumb for getting the most benefit from credit cards is to keep a low number of them and to pay off the balances in full each month. Pay attention to how much you are charging; if you can’t pay off the balance at the end of the month, do your best to stay under 30 percent of the total credit limit. The lower your credit card balances are in relation to your card limits, the more positively they will affect your credit score.

Having too much debt in relation to your income, opening up or closing too many cards in a short time, frequent credit report requests, balances going to collections, and making late payments are all factors that hurt your credit rating.

A good credit score is important to getting the lowest interest rates and maximizing your borrowing power when you need a loan. If you don’t trust yourself with credit cards, request a lower credit limit and pay off the balance each month.

Resist efforts to lure you into opening up a store or bank charge account, especially around the holidays, when you don’t need extra bills, advises Lynch. ❚