In the United States, credit cards play a central role in how your credit score is calculated. Whether you're applying for a mortgage, an auto loan, or another credit card, lenders rely heavily on your credit report to assess risk. Yet many Americans still misunderstand how credit cards actually influence their score.
Credit cards don't help or hurt your credit automatically. What matters is how you use them over time.
1. Payment History: The Foundation of Your Credit Score (35%)
Credit Utilization Has a Major Impact
Credit utilization refers to the percentage of your available credit that you're using. For example, if you have a $5,000 credit limit and carry a $1,500 balance, your utilization rate is 30%.
Lower utilization is better for your score. Many credit experts recommend keeping utilization below 30%, with under 20% being ideal. High balances can hurt your score even if you never miss a payment, making this one of the most overlooked credit factors in the U.S.
High Utilization
$4,500 balance on $5,000 limit
90% Utilization
Hurts your credit score significantly
Ideal Utilization
$750 balance on $5,000 limit
15% Utilization
Optimal for credit score growth
Internal Resource: Master this concept with The 30% Rule: Mastering Your Credit Utilization Ratio
Length of Credit History Builds Credibility
The age of your credit accounts matters. Older accounts show lenders that you have a longer track record of managing credit responsibly. This is why closing old credit cards can sometimes lower your score, even if you're not using them frequently.
Keeping older cards open and active with occasional purchases can help maintain a strong credit foundation.
Internal Resource: Understand why with The Longevity Rule: Why Credit Account Age Matters More Than You Think
New Credit Can Cause Short-Term Drops
Applying for new credit usually results in a hard inquiry, which can temporarily lower your credit score. Opening multiple accounts in a short period may signal financial risk to lenders.
Spacing out applications and applying only when necessary helps keep your credit profile stable and predictable.
Internal Resource: Learn the difference with The Silent Credit Score Killers: Hard vs Soft Credit Inquiry Explained
Responsible Use Matters More Than Carrying a Balance
A common myth in the U.S. is that carrying a balance helps build credit. In reality, paying your statement balance in full each month is one of the healthiest credit habits you can have. You still build positive payment history without paying unnecessary interest.
Internal Resource: Debunk this myth with Debunked: Should I Carry a Balance to Build Credit? (The Zero Rule)
Official U.S. Government Guidance
The Consumer Financial Protection Bureau (CFPB) — the U.S. government agency that oversees consumer credit — emphasizes paying on time, keeping balances low, and understanding your credit terms.
Visit CFPB Official Credit Card GuidanceKey Takeaways
- Payment history is the most important factor in your credit score
- Keep credit utilization below 30%, ideally under 20%
- Older accounts help build credit history length
- Space out new credit applications to avoid multiple hard inquiries
- Pay in full each month — you don't need to carry a balance
Final Thoughts
Credit cards are powerful financial tools when used responsibly. By paying on time, keeping utilization low, and managing accounts thoughtfully, you can build strong credit over time and improve your borrowing options.
Good credit isn't built overnight, but steady habits compound. Used wisely, credit cards can support long-term financial stability rather than work against it.
Ready to Build Better Credit?
Compare the best credit cards for building credit and find the perfect match for your financial goals.
Related Articles
Credit Card Pathway Editorial Team
Our editorial team specializes in credit education, helping consumers understand how credit works and how to use credit cards responsibly. With expertise in credit scoring, financial literacy, and consumer protection, we provide clear, actionable guidance for building and maintaining excellent credit health.