building credit with credit cards?
is it better to have 1 credit card, increase that ones limit or have couple increase there limit same time. will it make difference lets say if i have citi bank and bank of americas card. compared to only having citibank will increase the limit faster by it self than having two?
Before I continue, this is what makes up your score:
1. Payment history- 35%
2. Total debt owed to avialable credit ratio-30%
3. Length of time establishing credit-15%
4. Types of credit established-10%
5. Inquiries and New accounts-10%
Ok, with that said, here’s the answer to your question.
30% of your score depends on the ratio of credit available and the total debt that’s owed. The more available credit, the bigger the cushion. Now that doesn’t mean that just because you have available credit, you should use it all. In fact, you should use no more than 30% of your combined available credit at any given time. The ideal situation would be to have no more than 2 major credit cards, make small purchases that can be paid off on time every month. This way, you’re showing activity, but not going into debt or paying a lot of interest. For example, purchase up to $20/month max, pay it off, and do it again the next month.
Also, 10% of your score depends on the types of credit accounts you have. Especially with the new scoring system, it’s important to show versatility with different accounts. Now, again that doesn’t mean that you should purposely go out and get into debt just to do that. But it’s something to keep in mind. Don’t just load up on credit cards. 1-2 are fine, just make sure you make very small purchases to show activity, pay on time, and request for increases regularly. I can’t say this enough that you should only spend what you can afford. This is where people get into trouble. My suggestion is only spend what you readily pay off.
So, in closing, it does help to have more than one credit card, but again use only what you know you can afford to pay every month!
Good luck!