Positive impact:
1. On-time payments: Making your credit card payments on time every month is one of the most important factors that positively affects your credit history. Your payment history is typically weighted heavily in credit scoring models.
2. Low credit utilization: Keeping your credit card balances low relative to your credit limits can also help improve your credit score. Aim to keep your credit utilization below 30% of your total credit limit.
3. Building a longer credit history: Using your credit cards responsibly over a longer period can help you build a longer credit history. A longer credit history is generally viewed favorably by lenders.
4. Diversifying credit accounts: Having a diverse mix of credit accounts, including credit cards, loans, and mortgages, can show lenders that you can manage different types of credit responsibly.
Negative impact:
1. Late payments: Missing even a single credit card payment can negatively affect your credit score, especially if the payment is more than 30 days late. Late payments can remain on your credit report for up to 7 years.
2. High credit utilization: Maxing out your credit cards or having high balances relative to your credit limits can have a negative impact on your credit score.
3. Too many credit card applications: Applying for multiple credit cards in a short period can result in multiple inquiries on your credit report, which can lower your credit score. Try to space out your credit applications.
4. Closing credit card accounts: Closing old credit card accounts can shorten your average age of accounts, which could potentially hurt your credit score.
5. Collection accounts: If you default on your credit card debt and your account goes to collections, it can have a severe negative impact on your credit score.