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Getting the most out of credit card debt

As countless people have learned the hard way, it’s one thing to know how to use a credit card and another thing to understand how to manage one properly. Thousands upon thousands of individuals have found themselves facing serious financial challenges as a result of accumulating excessive amounts of credit card debt. However, that is not to say that credit cards cannot be used to actually improve a person’s credit rating and overall borrowing power.

If used correctly and responsibly, credit cards can have a profound and lasting impact on an individual’s FICO score, which is an important factor in gaining everything from employment to renting a home. Here are a few things that every credit card owner should know so that they can make their credit card debt work in their favor.

Never miss a payment

Always making credit card payments on time is one of the most important things people can do to ensure that their FICO scores improve. It’s estimated that a little more than 30 percent of the FICO rating reflects an individual’s payment history within the last seven years. As a result, any late and/or delinquent payments can have a serious effect on the credit rating.

Never max out

Another 30 percent of the FICO rating reflects the amount of credit card debt a person has. The individual’s actual credit card debt is compared to their total credit limit, and that percentage is reflected in their credit standing. If the debt-to-limit ratio exceeds 10 percent, it will negatively impact the FICO score.

Never close a credit account

While it may be tempting to close a credit card account once the card is paid off, it’s actually recommended that cardholders keep those accounts open. Maximizing one’s overall credit limit can help to lower their debt-two-limit ratio and improve their credit rating.

Source:, “5 credit blunders to avoid,” Anna Maria Andriotis, Jan. 15, 2014

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