Credit Utilization.

Of the main area’s that determine your Credit scores Credit utilization is one of the most important. There are two types of debt, revolving i.e. credit cards and installment i.e. a home or car loan. The main focus here is your credit card debt. You need to know what your credit limits are and what your credit balances are to figure out your credit utilization. Credit utilization is the sum of your credit balances divided by your total limits. For example if you have a discover card with a 5k limit and a 4k balance, A Master Card with a 10k limit and a 5k balance then your total high balance is 15k and your balance owed is 9k. Your utilization in this scenario would be %60.

The Chicken or the Egg.

A good rule of thumb here is that less than %50 is good, %30 is better, %10 is best, and %1 is elite. The higher your balances are the harder its going to be to have a good credit score. The credit algorithm views high balances and minimum payments as “your in over your head.” If you make more than your minimum payments or pay them off every month The algorithm says “you need more credit.” The more willing creditors are to extend you credit the higher your score can go. It’s kind of a chicken or the egg type thing but the moral of the story is if you can keep your total balance around %1 your credit limits and credit scores will all go up.