Credit Cards by Credit Score

What Score is Considered Good Credit?

Credit cards and credit scores are a delicate recipe; too much or too little of the ingredients could spoil the dish. Having worked in the mortgage industry for years I have seen almost every credit score and scenario imaginable and credit cards play a large role determining the scores.

On one hand they can improve your credit and over all credit ?worthiness? and on the other hand they can do just the opposite. Finding the right combination and wisely managing your credit cards is key to improving and maintaining a good credit standing.

Almost everyone knows that too much credit card debt is bad and this may have a negative effect on your credit. What you may not know is how the credit reporting agencies determine who has too much debt and who doesn't.

After all, credit bureaus are not aware how much people earn only how much they owe. The main criteria they use to judge excessive debt is a term called the "credit to debt ratio"

Meaning if you have one credit card with a $5000 credit limit and your balance is $4500 this ratio is high and will begin to affect your credit score negatively. Once your balance on your credit card rises exceeds 35% of your credit limit ($1750 for our example) the credit bureaus interpret this as having too much revolving debt.

The higher this ratio is the more adversely it affects your credit score. I do not advocate that you fill an excessive number of credit card applications; this can be detrimental to your credit scores. However, in a pinch, I have had clients use a balance transfer credit card to shuffle balances between cards to lower this ratio and improve their credit scores.

If you have a lot of credit cards, within reason, this will not lower your credit score. Having high balances just one or more credit cards will drop your credit score severely. Showing credit restraint and depth is one of the best ways to improve your credit scores. Meaning, if you have available credit lines and leave them ?untapped? this will have a very positive result to your credit score and over all credit profile. For this reason, I recommend to my clients not to close accounts that they have paid in full, unless the cards charge an annual fee.

Be careful though, the temptation is too great for a lot of people to keep a ready access to credit, yours truly included. If you don?t trust yourself with the credit card you can always shred it and keep the account open. My grandmother used to freeze her credit cards in a large glass of water to prevent ready access to them. Of coarse this was before she had a microwave.