Credit Card Habits, Sorted by What Your Score Weighs

A credit card can quietly build a strong credit history or quietly drain money through interest. Which happens depends far more on habits than on which card you hold. In the US, the most widely used scoring model, FICO, says its scores are built from five broad categories, each with a rough weight. Organizing good credit card habits around those categories shows which ones matter most.

Payment history: about 35 percent

This is the largest single factor. A payment that is 30 or more days late can be reported to the credit bureaus and may stay on your credit report for up to seven years, although its effect fades over time.

The habit: never miss a due date. Set up automatic payment for at least the minimum amount, so a busy month or a holiday never causes a late payment, then pay more manually. Many card issuers let you choose your due date, which can help align it with your payday.

Better still: pay the full statement balance every month. Most cards offer a grace period, often 21 days or more, between the end of the billing cycle and the due date. If you pay the full statement balance by the due date, you generally pay no interest on purchases at all.

Amounts owed: about 30 percent

The key measure here is credit utilization: how much of your available credit you are using. A balance of $1,500 on a card with a $5,000 limit is 30 percent utilization.

The habit: keep balances low relative to your limits. Lower utilization is generally better for scores, and people with the highest scores often use less than 10 percent. Because utilization is usually calculated from the balance reported on your statement, paying down a card before the statement date can lower it even if you always pay in full.

Requesting a credit limit increase can also lower utilization, provided you don't treat the extra room as extra spending money.

Length of credit history: about 15 percent

Older accounts help show a long track record.

The habit: think twice before closing your oldest card, especially if it has no annual fee. Closing it reduces your total available credit, which can raise utilization. Using it for a small purchase every few months keeps it active, since issuers sometimes close accounts that are never used.

New credit: about 10 percent

Each application for credit usually triggers a hard inquiry, which can lower a score slightly for a while. Several new accounts in a short period can look risky to lenders.

The habit: apply for new cards only when you have a clear reason, and space applications out, particularly in the months before applying for a mortgage or car loan. Many issuers offer pre-qualification checks that use a soft inquiry, which does not affect your score.

Credit mix: about 10 percent

Having both revolving credit, such as cards, and installment loans, such as a car loan or mortgage, can help slightly. This is the least important category and not a reason to borrow money you don't need.

Habits that protect your money, not just your score

• Know your rate. Average credit card interest rates in the US have been above 20 percent in recent years, according to Federal Reserve data. Carrying a balance at that rate is one of the most expensive forms of borrowing most people use.
• Read the statement. Check every month for charges you don't recognize, subscriptions you forgot about and any change in your interest rate.
• Watch out for cash advances. They usually carry a fee, a higher interest rate and no grace period, so interest starts immediately.
• Understand promotional offers. A 0 percent balance transfer can save money if you pay the balance off before the offer ends, but transfers usually carry a fee, often 3 to 5 percent, and some store cards use deferred interest, which can charge all the interest back if the balance is not cleared in time.
• Treat rewards as a bonus. Points and cash back are worth far less than the interest on a carried balance.

If you're already carrying a balance

Stop adding new charges to the card while paying it down. List your debts by interest rate and either focus extra payments on the highest rate first, which saves the most interest, or on the smallest balance first, which gives quicker wins. Calling the card issuer to ask for a lower rate or a hardship plan sometimes works, especially for long-standing customers. Nonprofit credit counseling agencies can also help set up a debt management plan.

Check your reports

You can get free credit reports from each of the three major bureaus, Equifax, Experian and TransUnion, at AnnualCreditReport.com, the official site authorized by federal law. Review them for errors, such as accounts you don't recognize or late payments that were actually on time, and dispute mistakes directly with the bureau. Many banks and card issuers also show a free credit score in their apps, which makes it easy to watch how these habits add up.