Many people are interested in using virtual credit cards because they offer an extra layer of security and can help protect against identity theft and credit card fraud. But does a virtual credit card affect your credit score?
Overall, a virtual credit card can definitely affect your credit score. Whether it has a positive or negative impact on your credit score depends on how you use it and how well you manage your credit in general.
What Is A Virtual Credit Card?
A virtual credit card is a type of credit card that exists only in digital form and is not linked to a physical card. It can be used to make online purchases or other transactions that do not require a physical card.
A virtual credit card can offer a number of benefits, including:
- Extra security. One of the main benefits of using a virtual credit card is the added security it provides. Because a virtual credit card is not linked to a physical card, it can be more difficult for hackers to steal your credit card information. This can help protect against identity theft and credit card fraud.
- Better budgeting tool. With a virtual credit card, you have greater control over your spending. You can set spending limits and expiration dates for the card, which can help you stick to a budget and prevent overspending.
- Ease of use. Unlike traditional credit cards, virtual credit cards can be accessed from any device with an internet connection. This makes them more convenient for online shopping and other transactions.
Aside from these advantages, virtual credit cards can also be useful tools for improving your credit score. Similar to physical credit cards, however, virtual credit cards can also hurt your credit if you use them irresponsibly.
A Virtual Credit Card Can Affect Your Payment History
A virtual credit card can affect your payment history, which is the most important factor influencing your credit score. Using a virtual credit card to make purchases and then make timely payments can help improve your payment history.
In general, a strong and positive payment history boosts your credit score. If you miss payments or make late payments on your virtual credit card, however, can hurt your payment history, which can significantly impact your credit score negatively.
A Virtual Credit Card Can Affect Your Credit Utilization Ratio
Virtual credit cards can affect your credit utilization, which refers to the amount of credit you are using compared to the amount of credit you have available. For FICO credit scores, your credit utilization ratio accounts for 30% of your score.
As a general rule of thumb, It’s a good idea to keep your credit utilization below 30%. Keeping high balances on your virtual credit card or maxing it out can hurt your credit score. Conversely, low credit utilization can help improve your credit score.
A Virtual Credit Card Can Affect The Length Of Your Credit History
The longer your credit history, the better your credit score. This is because it shows lenders that you have a track record of managing credit responsibly. And virtual credit cards can affect this credit-scoring factor.
While creating or opening a virtual credit card account won’t hurt your credit score, financial institutions will pull your credit report from the files of the credit bureaus. This results in a credit inquiry in your file, which temporarily dings your score.
Canceling a virtual credit card can also negatively impact your credit score, as doing so reduces the average age of your credit accounts. That being said, using a virtual credit card and making timely payments can help extend your credit history.
The Bottom Line
A virtual credit card can affect your credit score in a number of ways. Ultimately, it’s how you use a virtual credit card and manage your credit that determines whether the effect is bad or good for your credit score.
Fortunately, there are a variety of ways to boost your credit score. One of these is credit restoration, the process of removing negative information from your credit report. Call us at 888-799-7267 to schedule a Free Credit Consultation.
