When it comes to lines of credit, the rules about what affects our credit is confusing to consumers. Applying for new credit, paying off accounts, requesting increased credit limits and closing accounts can all affect our credit scores with the three major credit bureaus. The question is, do they impact credit negatively or positively? Let’s take a look at a few examples of situations you might run into.

Applying for New Credit

While applying for new credit can negatively affect your credit score, in the long run it also helps. Many consumers are confused by this, but here’s why it can be both good and bad. Opening new accounts shows other creditors that you are spending money you don’t have. If you have several new accounts opening at once, you will look like a credit risk. Meaning, they might be afraid of you charging up all the cards and not paying the funds back.

However, after about six months, your credit report is usually re-evaluated. If the opened accounts have been used responsibly and paid on time, your credit score will generally bounce back slowly. It is true that you need several accounts in good standing to establish credit of any kind, and often no credit can be worse than bad credit. So, consider applying for an American Express Black Card, but use it responsibly to show your creditors your credit worth.

Closing and Opening Accounts

As mentioned above, opening accounts is initially a count against your credit score, though it is an essential part of establishing credit. If you want to positively affect your credit score, try not to open a new account more than once every six months or more. This will give your credit score a chance to bounce back after the first line of credit is open, instead of setting it back a big chunk at once.

Closing accounts, as backwards as it seems, usually also has a negative influence on your credit score. While it may seem logical to close any accounts you are not using or have paid off, it is actually better for you to leave them open and use the account occasionally. Experts recommend using each account once each quarter for a small purchase, just to let your creditor know you are still interested in keeping the account open. They may close it otherwise. If you are worried about charging up your American Express Black Card, you can shred it or file it away where you won’t use it, or where it is safe from being stolen.

How Often Your Cards are Utilized

Most often we as consumers are told that the number one thing that affects our credit score is the percentage of debt used vs. debt available. While this is true – creditors like to see you using a small percentage of the available credit line – there is something else you may have not considered. How often you use your cards is also taken into consideration when your credit score is tallied.

Though all three major credit bureaus use slightly different formulas for determining your score, the general rule is the same. As mentioned above, the banks offering you lines of credit may decide to close your account if it remains inactive too long. This is because they’d rather offer that American Express Black Card to someone who will charge, incur interest, and pay. This makes the bank money. If your account goes unused, and it is closed, it will reduce your available credit ratio and your credit score will actually decrease slightly.