Many college students are bombarded by credit card companies with credit card offers. We constantly hear on the news that we should work on getting a great FICO score, so what exactly is the relationship between credit card activity and FICO score? The FICO score is affected by the following credit card activities:

Opening a credit card account

This one affects your FICO score in two ways. The first one is the age of the accounts you have. The older your credit history the better off you are. This is why college students are advised to get a credit card. If you get one while you are in college, you establish a credit history and thus a FICO score before you are likely to need it.

The other way opening a credit card account affects your FICO score is by changing the amount of credit available to you. You want to the amount of debt you have to be low in comparison to the amount of credit that is available to you.

Using a credit card

This is the activity most people think of. You go out and actually pay with your credit card. You do want to do this to keep your account active, but you are best off by paying off your bill every month. The lower your debt to credit ratio, the higher your FICO score will be.

Paying off the credit card bill

Late payments have a significant effect on your FICO score. You want to make sure you pay off all bills on time, if you want your FICO score to be high, and you certainly do, since that is what allows you to qualify for lower interest rates when you apply for a car or home loan.

Closing a credit card account

This activity affects your FICO score by potentially reducing the length of your credit history, if you close the account that you have had the longest. So when you apply for that first credit card, study the fees, rules and benefits carefully, so you can feel good about it for a long time to come. When you close a credit card account, you also change the credit available to you which shifts the debt to credit ratio.

Inquiries about your credit card accounts

Inquiries can affect your FICO score negatively since it could indicate that you are trying to increase your debt significantly. Unsolicited inquiries by credit institutions before you ever apply for a credit card do not affect your FICO score.

In summary, if you are planning to get a credit card to establish a FICO score, find one you can feel good about for many years, use it sparingly, always pay off your balance in its entirety every month and always pay your bills on time. You will look like a champion money manager to credit institutions and your FICO score will be high enough to get the lowest rates on loans and insurance policies.