Improve Credit Tip 2: Managing Your Credit Card Balances
This may sound easier said than done, but credit utilization is 30% of your credit score. Watching your credit card accounts could really help improve your credit score and it may be something you could impact more quickly than the other items that impact your score. A good area to focus on related to credit utilization is your revolving debt or credit card balances.
Creditors look at how much revolving credit you are using because it is an indicator of what they see as responsible credit management. Potential creditors want to know if you are using all of the credit available to you, or if you are managing your revolving accounts effectively.
You want to try to keep the balances on each of your credit cards below 50%. The most effective way to lower your credit card balances is to pay them off or pay them down if you can. If you have one card that is using more than 50% of the balance you may want to consider transferring some of the balance onto another card if you can get a good balance transfer rate. You want to make sure that all of your credit cards have less than 50% of their available credit used up, and that they stay that way.
Another important tip for improving your credit score is to not close unused credit cards. This may not work for everyone, but more often it is much better to have more available credit that you aren't using. If you pay off credit cards and close them, you could end up looking completely maxed out on your credit if your other cards have high balances. It is typically best to keep your credit cards open so that you have a lower ratio of credit card debt to available credit.
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