When you think of your credit score, you may not consider how this number is calculated or how your actions play a role. Simply put, each Credit utilization is a number used to compare the amount of debt you owe to the amount of revolving credit you have available. Your credit utilization rate can be calculated by dividing the total credit you have available by the total credit you have used. Your credit utilization rate increases as you use more of your available credit. It might be time to learn how to manage your credit utilization since it’s one of the factors that can affect your score. You must comprehend what your credit utilization rate is and how it can affect your life in either a good or bad way if you want to successfully manage it.
What is Credit Utilization and How is it Calculated?
Keep in mind, that while your credit utilization rate is based on your total revolving credit (credit cards, lines of credit) limit, individual utilization rates will also be taken into account.
Why Does Your Credit Utilization Rate Matter?
Credit utilization is one of the many factors that can affect your credit score. It is one of the most important factors that influence your credit score. Depending on the number, creditors and lenders may or may not approve your application. This is because your credit utilization rate is another way for creditors and lenders to measure your ability to manage your finances.
Managing Your Credit Utilization
Since your credit utilization rate accounts for 30% of your credit score, you want to pay close attention to this number to ensure it doesn’t start to negatively impact your score. This is especially true when you want to improve your score to increase your chances of being approved for things that require good credit such as applying for a home loan or apartment.
You can successfully manage your credit utilization rate by:
- Increasing your credit card limit
- Paying your credit balance in full instead of just the minimum balance
- Keeping credit accounts open even when there is little to no use
- Pay down debts
- Actively monitor your credit usage
Keep in mind that the goal of managing your credit utilization rate is to keep it at 30% or less. This doesn’t mean that you have to completely stop accessing your revolving credit, but you want to do so responsibly if you don’t want to see your credit score suffer.
For credit repair services and advice, contact Tax Plus Financial Services today! Tax Plus Financial Services was created to help those in need of trustworthy advice and financial preparation keeping their best interest in mind.