Credit Improvement: Manage Your Debt Part 2
written by Credit-HQ ExpertKey Credit Ideas: Revolving Utilization and Your Credit Score
The formula that the three major credit bureaus use to compute your credit score is called FICO. There are several major factors that can make a significant difference in the outcome of your credit score. Your credit history and the number of times you have made late payments may be the biggest factor in how your credit score looks. But next to that, your level of debt in ratio to your available credit may be the second most potent value in what your final credit score will be.
Thirty percent of your FICO score comes from your debt level. If your revolving utilization is quite high, the credit score that shows up on your credit report will be low. And that value is what is used by businesses you need to work with to decide if you are a responsible manager of your finances. But you have control over this number and there are things you can do including…
- Now that you know your revolving utilization, continue to monitor it and set some goals to bring it down. Your primary tool for doing that is lowering your level of debt by paying it off.
- You can also work toward increasing your credit limits. If you are a good customer for your credit accounts and you pay your monthly bills on time and demonstrate financial responsibility, your creditors may naturally raise your credit limits.
- Pay some accounts down but don’t close them. By keeping paid off accounts open, the available credit in those accounts is added to your credit ceiling but you have little or no debt to add to your used credit. This reflects well on your revolving utilization.
- Keep enough activity on accounts so your lenders don’t close your accounts. By charging a small amount on each account and then paying it down, your account is active so they will leave it open. Not only does this give you more credit availability, it looks good when your credit score is computed.
- If an account is getting close to being paid off, slow down. Yes, leave small balance on every account so you continue to get statements and make payments on the account. This activity demonstrates good use of credit, which is what your credit score is all about.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
[...] Click here to see Part 2: Credit Improvement: Manage Your Debt Part 2 [...]