Save your credit score: Tips on using credit cards

GRAND RAPIDS, Mich (WOTV) – An important factor in building or improving your FICO score is using credit responsibly. It’s also helpful to understand how credit cards impact your credit score.  Here’s some quick tips to think about:

  •  Retail Store Cards and Your Credit Rating.  These are the cards that are issued with the branding of the store or chain of stores. These are the cards that can only be used at the specific store that issued them. And while the use of these cards results in an almost endless flow of discount offers in the mail and for purchases, keep in mind how your Credit Score may be impacted.
  • Rates on Retail Store Cards are typically higher than non-retail cards. They may run around 10% higher, averaging 20% interest and upward.  That makes your purchases more expensive if you cannot pay them in full the following month.  Outstanding debt impacts your credit score (FICO score).
  • Credit Limits on retail store cards are low relative to general use credit cards like VISA and MasterCard. One measurements used by credit scoring models is called the “debt-to-limit” ratio or “revolving utilization”.  If you plan to charge $500 worth of items on a card with a higher credit limit (say $15,000 credit limit) as opposed to a retail card with a low limit (say $2,500), that ratio is going to be much better for your credit score.
  • Also, your credit score is impacted by the number of credit cards you have, whether you use them or not. Your FICO score takes into consideration something called a “credit utilization ratio”. This ratio basically looks at your total used credit in relation to your total available credit; the higher this ratio is, the more it can negatively affect your FICO score


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