How well do you know your credit cards?

Using a credit card doesn’t require much effort or experience. Swipe, insert or click and you can charge what you want within the credit limit. Understanding credit cards, however, takes some knowledge.

The more you know about credit cards, how they work and how they fit into your financial life, the more likely you are to use them wisely. Here are some common questions and answers about credit card basics.

How do credit cards affect your credit score?

Using a credit card has an impact on two of the biggest factors in your credit score: credit utilization and payment history.

— Utilization is the percentage of available credit currently used. If you have a limit of $5,000, for example, and a balance of $1,000, utilization is 20 percent. Utilization tends to have a negative impact on credit scores once it passes 30 percent.

— Late or missed payments can put a dent in your credit score, although the extent of the damage depends on your overall credit.

How you use credit cards can have a far-reaching impact on your finances. Your credit score affects your ability to borrow money for major purchases such as a car or home as well as how much you’ll pay in interest.

How do credit cards affect your credit report?

Credit score is calculated from information in your credit report. Most big card issuers report account activity to the three major credit bureaus — Experian, Equifax and TransUnion — every month. But some card issuers report only to one or two, or even none. If you’re trying to build credit, look for a card that reports to all three; if it’s not clear, contact the issuer. This way, payments will show up in your credit score, regardless of which report was used to calculate it.

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Source:: The Denver Post

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