Why the Decline in Credit Use?

• Prior to the Credit Card Accountability Responsibility and Disclosure Act of 2009, lenders had few regulations on the amount they could charge in late fees or restrictions on extending credit to college students with no verifiable source of income. Because of the new law, consumers receive more transparent credit disclosures that grant them almost two months' notice before each change to their credit card account. Prior to the law, some consumers experienced a dramatic rate increase or lowered credit limit as a response to the national economic crisis, leading to declines in the use of general purpose credit cards.
  
  

How to Use A Credit Card

• Credit cards help you boost your credit rating each month. Keeping your balances low and your bills paid on time each month leads to a positive report to the three major credit bureaus each month. Ideally, the balance on your credit cards should fall below 30 percent of your available credit limit. According to Bankrate, consumers in the top 1 percent of credit scores maintain a balance of less than 10 percent of their available credit limits. The amount you charge relative to your available credit limit is called your credit utilization ratio. Avoid carrying a balance on your credit cards over more than one billing cycle. Small charges should be manageable enough to repay within one billing cycle.
  
  

How Credit Scores Are Determined

• Your credit score is influenced by five major factors --- your payment history, the balances on your credit accounts, the length of your payment history, your new credit and types of credit accounts you own. At 80 percent of your credit score, the top three factors influencing your score each month are payment history, amounts owed and length of your credit history. Length of credit history includes how long you maintain your credit accounts and the date of your last activity. If you have inactive accounts, consider making small charges regularly to keep your score high.
  
  

When the Grass is Greener

• When you have poor credit, credit card offers with high interest rates and unreasonable fees are customary. However, as you gain control of your finances and begin managing your credit accounts more responsibly, better card offers begin to arrive in the mail. Consider transferring your balance to a new credit card if the terms and interest rate offer you a better credit utilization ratio. For example, if you have a 20 percent interest rate on a card with a $300 limit, but receive an offer for a card with a 12 percent interest rate and $1,000 limit, it may be time to switch over to a new account.
  
  Even though you qualify for more credit, keep spending what you can afford to repay in a short time frame to avoid accumulating unmanageable debt.