Posted on: Oct. 29, 2017 in Credit Score

Common advice tells us that if your credit is bad, you’ll want to raise your score as soon as you can so that when you need to get a loan, you can. That advice doesn’t always include how to fix your credit though. You may already know that if you’re in debt you need to get out, but that isn’t as easy as it sounds (and it doesn’t sound all that easy, does it?).


You need solid tips that can have an impact on your score now. What can you do?

Credit Utilization is Key

Your credit utilization ratio is the amount you owe compared to your total available credit. This ratio is calculated across all your cards, so your outstanding balance on each card matters. Here’s how it works. Let’s say your credit limit is $1,000. If you have a balance of $500, you are at a 50% ratio. Spend $750? You’re at 75%.

Experts say that a credit ratio of 10% or lower is idea. Getting it below 30% is good and much easier to attain.

Consider All Your Cards

Building on the above example, let’s say you have three credit cards. Each has a limit of $1,000. One has a balance of $800. The other two only have $49 each on them. Your combined limit is $3,000 and your combined debt is $998. You’re below 30% so you think you’re all good. However, because that one card is at 80% utilization, your score is going to take more of a hit than if you had that divided over the three cards so they all at 30% or below. Of course, the fact that two out of three do have low utilizations does help, just not enough to offset the 80% card.

When Paying It All Off Isn’t an Option

The best way to lower your utilization is to pay off the debts you owe. But life isn’t always that easy. In the meantime, there are a few things you can do.

  • Ask for a credit increase. As long as you’re not going to rack up more debt, this will lower your utilization ratio be increasing your limit.
  • Don’t close old cards. If you transfer a balance or pay off one card, don’t close it. That card will have a very low utilization and it will help balance out your overall score.
  • Avoid maxing out one card. It’s easier to pay off debts and stay motivated by having all the balances in one place, but avoid maxing out a card if you can. Your score will still be negatively affected by the debt, but your utilization ratio will be lower on that card.

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