The main types of cards that can impact your credit history are credit cards, charge cards, and debit cards.
Credit cards and charge cards will help build your credit if used responsibly by making on-time payments, keeping balances low, and having a long history with accounts. Debit cards do not directly impact your credit history, but overdrafts or returned payments can negatively affect your credit. Overall, using credit cards responsibly over time is the best way to build a strong credit history.
Which Type of Card Impacts Your Credit History? (Everything Explained)
Type Of Credit cards
There are many different credit cards out there, each designed for different needs. Choosing the right card depends on your spending habits and financial situation.
The most popular type of card is rewards card. These let you earn points, miles, or cashback when you spend on the card. You can redeem these rewards for things like travel, gift cards, or statement credits. Good options are cards that give higher rewards for categories you spend a lot in, like gas, groceries, or dining out.
Other types of cards include:
- 0% APR cards – These offer a 0% interest rate on purchases for a set period, usually around 12-18 months. This can save you money on interest if you have a large purchase to pay off over time.
- Balance transfer cards – These allow you to transfer high-interest debt from another card onto them to benefit from a 0% rate for a period. It’s a way to reduce interest costs on existing balances you can’t pay off all at once.
- Travel cards – These earn you points to redeem for travel purchases and offer travel benefits like lounge access, priority boarding, etc. The rewards are best if you travel frequently.
- Business cards – Designed for small business owners, these cards provide benefits like employee cards, rewards on common business purchases, extended warranty on equipment, etc.
- Student cards – These are for those new to credit and have lower credit limits and looser approval criteria. They help students build credit responsibly.
- Secured cards – These require an upfront security deposit that acts as your credit limit. They help those with poor credit or no credit history to establish and build credit.
The most important things are paying your balance off each month, keeping your utilization low, and only applying for cards that make sense for your spending habits.
How to Improve your credit history?
Here are some simple tips to help improve your credit history over time:
- Pay all your bills on time each month. Set up autopay or reminders if needed. This shows lenders you can reliably make payments.
- Keep credit card balances low. Experts recommend less than 30% of your total credit limit. High balances can hurt your credit utilization ratio.
- Apply for new credit carefully. Too many hard inquiries from applying for multiple new accounts can lower your score temporarily. Space out applications over time.
- Have a mix of credit types. Having revolving credit cards plus installment loans like a car loan or mortgage shows you can manage different types of credit responsibly.
- Check your credit reports and fix errors. Dispute any inaccurate information with the credit bureaus to keep your reports error-free.
- Don’t close old credit card accounts. Having longer average account history helps your credit. Add new accounts over time but keep old ones open.
- Consider being an authorized user. You can benefit from the long account history of a family member or partner’s credit card if they add you as an authorized user.
- Pay down debt rather than moving it around. Consolidating debt with a personal loan can simplify payments but won’t improve your underlying credit habits.
The most important habits are making payments on time, keeping credit card balances low, having a mix of credit types, and giving it time. Be patient and responsible, and your credit score should steadily improve.