Credit Info How Credit Cards Affect Credit Health Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint.com Published Dec 6, 2017 - [Updated Nov 2, 2020] 4 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Editor’s note: Looking for the difference between a charge card and a credit card? Read the full blog post here. It’s the holiday season, but it’s also not too early to start thinking about a happy, healthy new year. That’s especially true when it comes to credit cards and your credit health. Whether you don’t have any cards or don’t have room in your wallet for any more, the end of the year is a great time for a credit card review. But before you do, it pays to know how credit card decisions you make may factor into your credit health. How might credit card usage be affecting my credit health? If you’re not using too much of your available credit on any of your cards, that’s generally a good thing. However, if you’re regularly getting close to maxing out some or all of your cards, you may be hurting your credit health. That’s because when evaluating your creditworthiness, lenders typically view borrowers who regularly use up a lot of their available credit as a higher risk of default. That’s true even if you always pay off your (high) balances in full every month. You should also know that missing even one credit card payment may have a dramatic effect on your credit health. Generally, on-time payment is a critical factor creditors look for when they’re considering lending you money. How might opening card accounts affect my credit health? When you apply for a credit card, the issuer usually makes what’s known as a hard inquiry on your behalf. In this case, a hard inquiry means you’re giving permission to the credit card issuer to request your credit report from one or more credit reporting agencies to help evaluate whether or not to issue you the line of credit you’re applying for. Whether or not you end up qualifying for the card, this hard inquiry would be reported to one or more of the credit reporting agencies and listed on your file. Typically, credit scores factor in hard inquiries as a small negative. That’s because creditors generally don’t like to see too many hard inquiries on your report. Why? Because when someone’s applying for a lot of credit, especially within a short amount of time, it’s a signal they may be more likely to default on their existing credit. Opening a new account can also help boost your credit health in a few different ways. For one, another lender will have decided to extend you credit. That’s a positive in future creditors’ books (assuming, of course, that you can handle this new line of credit). Your new line of credit will also show that you have more available credit than before, which can also be perceived as a positive. How might closing card accounts affect my credit health? At first glance, you may think closing an account has a positive effect on your credit health. Especially if you’re struggling to balance many credit card accounts, it can seem as though creditors would encourage slimming down. And there’s some truth to this – if you need to close an account or two to get ahold of your credit situation to make on-time payments, reduce maxed-out balances, and the like, that would likely help your credit health. But, remember that closing an account means you’re managing one fewer than before. It also means that whichever allowable credit you had on that card will go away. This is why, usually, closing an account will have at least a short-term negative effect on your credit health. Putting it all together. If all this sounds complicated, it doesn’t need to be. In the end, be honest with yourself about your credit card usage. If you’re struggling to make on-time payments or find you’re maxing out your cards, whichever perks or rewards you get from a card may not be worth the struggle and potential damage to your credit health. If, on the other hand, you’re getting good benefits out of your credit cards, handling on-time payments, keeping your debt in check, and not using too much of your available credit on each card, you might decide to add another card to your wallet. Take the time to review your credit cards now, so you’re a step ahead when the new year rolls around. After all, who needs a new year’s resolution when you’re already ahead of the game? About TransUnion At TransUnion, we believe in Information for Good. Whether it’s creating web-based financial products or sharing expert tips, insights and news on our blog, our mission remains the same: putting powerful tools and resources in your hands to help you know your credit, protect your identity and more effectively manage your financial picture. Previous Post How to Throw a Holiday Dinner Party on a Budget Next Post Own Less, Give More: A Minimalist’s Perspective on Contentment Written by Mint.com More from Mint.com Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do … Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on… Financial Planning What Is Income Tax and How Is It Calculated? Investing 101 The 15 Best Investments for 2023 Investing 101 How To Buy Stocks: A Beginner’s Guide Investing 101 What Is Real Estate Wholesaling? 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