Credit Card Activity & FICO Scores

A FICO score is a widely used credit score that all those who've used credit have. The score, a number from between 300 and 850, tells potential creditors how much risk you represent to them if they give you a loan. Using any kind of credit, including your credit cards, can raise or lower your score depending on the actions you take.

Purchasing

Credit cards allow you to buy things easily and without having to carry around a lot of cash or write a check. While your behavior as a debtor affects your FICO score, using your credit card to make individual purchases doesn't really have any impact on the score. The key factors in your FICO score depend mostly on your activity over time, such as how regularly you pay your bills and how large a balance you keep.

Balances

Whenever you use your card and keep a balance from month to month, the size of that balance affects your credit score. Your credit cards have a set limit on how much you can spend, known as your credit limit. When you carry a balance, the size of the balance when compared to your limit is called your credit utilization ratio. According to Kiplingers, if you have a credit-utilization ratio of more than 25 percent, this negatively affects your credit score.

Paying Bills

Apart from the balances you keep, paying off your monthly bills is essential to your FICO score. FICO reports that timely bill payments accounts for 35 percent of your score and is the single largest factor in its calculation. According to Yahoo Finance, your FICO score drops by between 60 and 110 points each time you miss a bill payment by 30 days.

Time and Other Factors

Other credit card activities also affect your FICO score, though to a smaller extent than bill payments and credit utilization ratios. In general, the longer you keep a credit card the better because it shows a longer history of credit. However, you cannot rely solely upon credit card use to build a FICO score, as about 10 percent of your score is made up of the varieties of credit you use. For example, using several credit cards plus a variety of installment loans is much better for your score than using just a credit card or two.