It’s no secret that credit cards can have a serious negative impact on your personal credit score, but understanding exactly how that whole process works is something that most people don’t ever bother to consider…until it’s too late.

Whether you are trying to qualify for a new home mortgage, buying a new vehicle, or just working to maintain your credit score, having a solid foundation of knowledge on how your credit card usage relates to that number can really be a huge help towards getting it moving in the right direction.

In order to help you do exactly that, let’s work through each of the different ways that your credit cards impact your credit score and break down what you can be doing to make sure that each of them are working in your favor.

Payment History

The most important thing to consider when dealing with any type of credit card account is that you must be sure to always make your payments on time. Payment history is the most critical component of your credit score, so any late payments will always ding your score the hardest.

In most cases, making your regular payments on time is more important than the balance on the account. So while we want you to understand that making minimum payments is not a good long-term plan for keeping debt under control, it is absolutely critical that you are always making at least that minimum payment by the statement due date.

Credit Utilization

After payment history, the next most important aspect of your credit card accounts is how much those balances are relative to the limits on your accounts. This ratio is known as credit utilization, and it is a way for credit rating agencies to gauge how responsible you are with the amount of credit you have at your disposal.

One easy way to game the system here is to ask your credit card company to increase your credit limit every 6-12 months. Of course, you should only do this if you are responsible enough to avoid spending that additional credit. But if you are, it is a quick way to increase your spending power, thus driving down your credit utilization.

Length of Credit History

Another important factor that will impact your credit score is the length of your personal credit history. This number describes the length of time that your oldest credit account has been open, which gives the credit rating agency a ballpark as to how established you are as a credit risk.

There isn’t much you can do to improve yourself here once you get going, but it drives home the importance of having long-standing accounts with one or two credit card companies.

Opening New Credit Cards

One potential negative that you can easily avoid is opening new credit card accounts. Every new account that you apply for will pull your credit, and a large number of those pulls in a short amount of time can temporarily drive down your overall credit score.

Opening even one new account can have a negative impact on your credit score for a short period of time, so make sure that you aren’t activating any new cards if you are at a point where you are worried about your score.

Closing Old Credit Cards

If opening new cards can ding your credit score, then most people assume that closing old cards is a way to improve that number. However, this is actually the exact opposite of how the credit rating agencies operate.

Those agencies view the closing of old accounts as a reduction in the total amount of revolving credit available to you, which instantly increases your credit utilization. Closing old accounts can also reduce the length of your credit history, which would give it a doubly negative impact on your credit score.

Whether you love them or hate them, there is no denying that your relationship with credit cards has a direct impact on your personal credit score. But with this basic understanding of how that relationship works, you should be able to use those credit cards as a tool to increase your credit score while avoiding the potential negative consequences of misusing them.