Understanding how credit cards affect your credit score

by John Terry | Last Updated:  August 27, 2019

A lot of people think that credit cards will ruin your credit. But, if used responsibly, credit cards can affect your credit score in a good way.

The highest credit score possible when using FICO and VantageScore 3.0 is 850. And while it is nearly impossible to achieve that without 30+ years of perfect credit history, credit cards can be crucial to help improve your credit score over time.

Types of Credit Scores

In order to use credit cards to positively affect your credit score, it’s important to first understand the different types of credit scores. To put it simply, a credit score is just a number than shows your risk to a lender – the higher the number, the lower the risk you are. But, not all credit scores are created equal.


The most common credit score is the FICO credit score. The range of FICO scores is 300-850, with the average credit score for FICO coming in just around 700. Scores under 690 are poor/average, 690-720 are good, and 720 and above is very good/excellent.

Credit bureaus like Experian, Equifax and TransUnion all produce their own FICO score for each person.


VantageScore is simply another measurement for credit scores. The range is 300-850, so it can be easily compared to FICO scores. It counts multiple inquiries, even for different types of lines of credit, within a 14-day period as a single inquiry.

VantageScore takes six things into effect when coming up with the score: payment history, age/type of credit, percentage of credit limit used, the total amount owed, recent credit behavior and inquiries and total available credit.

What goes into your credit score

For the sake of this article, we’re going to focus on FICO credit scores moving forward.

Payment history — 35%

Paying on time is the single most important aspect of your credit score. In our Beginner’s Guide, we talk about how paying your balance off in full and not missing payments is crucial to getting any value from credit card points. Whether you have on automatic bill pay or an alert in your phone, be sure to pay your credit card bill on time.

Suggestion: Change all of your due dates for each credit card to the same day. It’s much easier to manage just one date for all of your credit cards than multiple due dates.  

Credit utilization — 30%

Credit utilization is something that every credit card holder should understand. Lenders don’t like to see cardholders use more than 30% of their total credit. This means that if you have a credit line of $5,000, putting more than $1,500 on your card without paying it off will decrease your credit score.

The most important thing is to make sure your credit utilization is below 30% but above 1% when your statement closes. The closing balance is the one that is reported to the credit agencies.

Suggestion: If you do not have a high credit limit, try paying your credit card off multiple times per month. This will keep your overall utilization rate low.

Length of credit history — 15%

While credit utilization and payment history control the majority of someone’s credit score, the length of credit is also important. In general, the more total years of credit history, the better your credit score.

Getting credit cards, and leaving them open, is the best way to lengthen your credit history. There’s almost never a reason to outright close a credit card. If you have a card with an annual fee you no longer want to pay, simply downgrade to another card. Similarly, do keep in mind that when you apply and get approved for a new credit card, this is going to decrease your average length of credit due to a brand new account.

New credit — 10%

When opening a new credit card, your credit report will get a hard pull. This will only affect your credit for a year, but it does make a small impact. For good reason, when banks see many new forms of credit in a short period of time, it can raise some eyebrows. Be smart about applying for new forms of credit because there are consequences.

Chase enacted the 5/24 rule to limit card application from those who have been approved for five new credit cards in a period of 24 months.

Similarly, American Express has started to limit bonuses for those than having had more credit activity. Bank of America recently started the 2/3/4 rule – cardholders cannot have opened two cards in two months, three cards in 12 months or 4 cards in 24 months.

Types of credit – 10%

There are many different types of credit – credit cards, loans, mortgages, etc. Having more of these gives banks the indication than you’re able to manage your finances responsibly. With that said, this is the smallest part of your FICO score. You will not be able to have a perfect credit score without many types of credit, but you’ll still be able to have a score high enough to qualify for popular travel cards like the American Express Gold Card and the Chase Sapphire Reserve.

How to find out your credit score

There are many different ways to check your credit score for free – we will go over a few below.

American Express automatically pulls a FICO score every month for each cardholder. If you log onto your American Express account, you can access your credit score once per month.

Chase will give cardholders the chance to check their VantageScore once per week by visiting Credit Journey.

Credit Karma is a popular service to track and improve an average credit score.

Credit Karma is a popular service to see scores for free by simply setting up an account.

Experian allows everyone to access its credit score once per month. Simply log onto their website to find it out.

Mint lets its users pull it’s credit score for free as well. It will show up on your account dashboard.

Final Thoughts

In order to get popular travel cards, it’s important to have a score of 690 or above. If you don’t think you have a high enough credit score, check out a list of credit cards that will help increase your credit score. Remember, we always suggest favoring those cards with transferable points.

Understanding how having travel credit cards might be the single most important part of the points and miles hobby, but if you can grasp it, your credit score will improve.