Improve credit score by using credit cards
|By Leslie McFadden
The credit score is key to one's financial life, and experts say it is a measure of how consumers manage credit. But
most consumers are mystified as to how their behavior influences the score.
We decided to ask readers what they wanted to know
about FICO scores. From the responses to our newsletter
call for questions, we learned that many people are concerned about
inactive credit cards
they have, how many credit
cards are too many and what you need to do to improve your credit
We posed these questions to Fair Isaac product support manager Barry Paperno, who has worked for the credit score
keeper since 1995.
A reader wrote, "I use one credit card and have two in the drawer. I want to buy a house in the next two years and wonder
if I should begin using and paying off the other cards to get them on the credit report rotation to boost my score."
Yes, it's a good idea (to start using the other cards). The good thing about that is that you have the history, you don't have to apply for it and
incur any inquiries. Depending on what the (credit) limits are and how long they've been in the drawer -- they might be expired -- there might
be a couple reasons to call the issuer. One is to send you a new card, and another is to check on the limit. If it's not particularly high, see
if they can increase it. Credit card utilization (the amount available versus amount in use) is such an important factor: If you've had it in
the drawer for a couple of years, and it's a department store card with a $500 limit, it doesn't hurt to ask, "Can you raise that?"
|A FICO expert discusses the effect of inactive credit cards and what consumers need to do improve their credit scores.
|4 questions for Fair Isaac expert
(The reader) is probably going to benefit by having more credit available, and if it's two years later that they plan to actually buy
a home, then any negative effects from opening that account, such as inquiries, will be long gone. (The reader) will be in good shape.
Again, the more you have available, the lower potentially your (utilization) percentage will be. That said, you can still
have a fine score with just the one card.
How often should people use their credit cards in order to keep the accounts active?
Like just about everything, it varies, but I'd recommend using a card at least every six months to keep it active.
One reader wrote saying he had 15 credit cards. If you're applying for a mortgage anytime soon,
would it be advisable to close some of those cards because you have so many?
No, closing them is not going to help you. The score likes to see you have a (good) credit mix -- that's looking at the proportion of how
many credit cards you have in relation to auto loans or in relation to mortgage loans. As long as it's on the credit report, whether it's
open or closed, low balance or no balance, or old or new, if it's on the report, the score is going to count it when counting that mix or
when looking at the ideal number of cards. If this person is using 15 cards or has 15 cards over the last 20 years, only three of which
they use, the score doesn't care. If it's on the report, it counts it. But that's not heavily weighted, so that's nothing to lose any sleep
over, either. Closing it is never going to help your score. Closing accounts could cause them to come off your report that much sooner and
negatively affect your lengthy credit history.