How Do Charge Cards Affect Your Credit Score?

How Do Charge Cards Affect Your Credit Score?

Although charge cards aren't revolving accounts and generally won't affect utilization rates, many card issuers will still report your charge card's details to the credit bureaus—Experian, TransUnion and Equifax. They can still appear in your credit report and, similar to credit cards, affect your credit scores in many other ways.

Here are some of the ways that a charge card could affect your credit scores, organized by five commonly used scoring categories:

• Payment history: Your history of making your card payments on time or missing payments could help or hurt your credit.
• Credit mix: Responsibly managing a mix of different types of credit accounts, such as loans and cards, can help your credit scores.
• Amounts owed: Balances on charge cards can still affect non-utilization-rate scoring factors, such as the number of accounts you have with a balance.
• Age of your credit accounts: Opening a new charge card can decrease the average age of your credit accounts and give you a brand-new account in your credit history.
• New inquiries: Applying for a charge card may result in a hard inquiry on your credit reports, a record of when a creditor requested your credit report before making a lending decision.

Can Charge Cards Hurt Your Credit?

A charge card could hurt your credit, but it depends on how you manage the account and what else is in your credit profile. Some things that might hurt your credit include:

• Missed payments: If your payment is more than 30 days late, the issuer could report the missed payment to the credit bureaus. Even if you bring the account current, the late payment can hurt your credit and stay on your credit report for up to seven years.
• Collection accounts: Credit card issuers may send severely past-due accounts to collections. The collection agency may then report the collection account to the credit bureaus, and the account can remain on your report for seven years.
• Recent applications and accounts: Hard inquiries, a lower average age of credit accounts and brand-new accounts in your credit report might lower your scores.
• Account balances: Having too many accounts with balances and especially high balances on cards can hurt your credit.

A charge card doesn't have to hurt your credit scores depending on how you manage it, but it's important to keep some of these potential effects in mind before applying for a card.

How to Build Credit With a Charge Card

You can use a charge card to improve your credit scores over time if you manage the payments and balance responsibly:

• Make your payments on time. Regularly paying the monthly bill on time can be one of the best ways to use your charge card to build credit. To make sure you never miss a payment, consider setting up autopay.
• Pay off your balance early. If you can pay off the entire balance before the end of your statement period, your card issuer might report the $0 balance to the card issuers. Having fewer accounts with balances could help your credit scores.

Managing your budget and expenses can be important for doing both of these. Some charge cards have programs that let you pay off certain balances over time, but you generally have to pay off the full balance every month.

Track Your Credit and Compare Card Offers

You can track your Experian credit report and FICO^® Score^☉ for free with an account from Experian. Look over which accounts are in your report, what's being reported and what's helping and hurting your credit scores. If you're looking for a new card, Experian can also match you with card offers from our partners based on your credit.