Editorial Policy

How to pick a card and 3 ways to boost your credit

Erica Sandberg

December 3, 2015

QHi Erica,

What is the difference between a MasterCard credit card and a Visa credit card on my credit? I have a Visa, so should I get a MasterCard now? I’m new to this. I want better credit, so I want to do it the right way and not mess up. Thanks! — Luke

ADear Luke,

A Visa or MasterCard logo on your card has no effect on your credit score. What matters is how you borrow and repay with your card.

Visa and MasterCard are payment networks, not lenders. They don’t send a cardholder’s activity to the credit reporting agencies. The card’s issuer, such as Citi, Chase or Wells Fargo, does that. The one who controls your credit history is you – in how you wield your card.

The only real differences between MasterCard and Visa cards are perks, as the card networks administer certain credit card benefits for card issuers. Ask Erica

There won’t be many of these perks for a basic credit card (which is probably what you have), but more premium products will have more extras. Car rental and air travel insurance and extended warranty coverage are often standard with many cards. Elite cards might be equipped with a special concierge service, shopping discounts, hotel upgrades and roadside assistance plans.

Other factors to assess when choosing a card include fees (annual fee, late payment fees, cash advance fees, etc.) and interest rate (this will matter a lot if you pay over time).

When shopping for a credit card, base your decision on what the account offers.

If you’re in the market for a rewards card (most come with annual fees), look for one that meets your needs. Who cares if a card comes with a concierge if you’ll never want to buy tickets to a sold-out Broadway show? But if you drive cross-country frequently, roadside assistance may be an attractive feature. The ability to accumulate points transferable for cash, products and services may also be appealing.

To improve your credit score (to qualify for one of these cool cards), this is what you need to do:

  1. Charge at least once a month. The issuer will send activity to the credit reporting agencies, and the credit scoring companies (such as FICO) will have enough data to create an accurate risk assessment.
  2. Pay on time. Payment history is the most critical component of a FICO score, accounting for 35 percent. The other FICO score components are amount owed or credit utilization (30 percent), length of credit history (15 percent), credit mix (10 percent) and new credit (10 percent).
  3. Keep the debt to zero. Only charge what you can and will repay in full because maintaining a low debt-to-credit-limit ratio (credit utilization) is essential to a high FICO score. A general rule of thumb is to keep your total credit utilization below 30 percent.

Follow these three steps and it won’t be long before your credit scores rise. After about six months, check your credit scores to see how you’re doing. Then apply for another credit card that fits your credit rating profile and offers some advantages that suit your lifestyle. That may be an account bearing the Visa or MasterCard symbol, or it could be a card issued by Discover, American Express or some other issuer, such as Citi, Chase, Wells Fargo or Capital One.

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