How Using a Single Credit Card Affects Credit Score
Leslie McFadden of BankRate.com received a question from one curious reader, asking if putting all expenses on one card will negatively affect credit score even if the card never carries a balance.
McFadden cuts right to the chase: “Consistently charging up a single credit card each month could result in a lower credit score the next time a lender or another business checks it.”
This is because the balance on a credit card is reflected by the most recent balance reported by the issuer of the credit card. If a credit bureau stumbles upon a consumer’s balance statement that has a significant balance on it, then this will negatively affect a credit score.
McFadden then goes on to give the reader some simple and practical advice. “To maximize your score, use less than 10% of your credit limit.”
This keeps the debt-to-limit ratio (a.k.a. utilization) down to safer levels. A single credit card may offer generous rewards, but maxing out that credit card raises its utilization which in turn lowers the user’s credit score.
Responsible use of multiple credit cards will allow a user to spend more money without maxing out the utilization on a single card – effectively helping to build up credit score.
Paying just before the statement closing date will also help “clean” a credit card user’s record prior to inspection; helping to smooth things along.