It’s easy to keep swiping your card over and over again, especially with the holiday season upon us. But be careful not to get too close to your credit limit when you’re swiping away.
One of the easiest ways to lower your credit score is by having a low utilization rate. This is your total credit card balances divided by your total credit card limits. When you have a high utilization rate, you spend almost as much as your credit limit. You have high outstanding debt, making you look like an increased credit risk. So, if you have a $1500 credit limit and you consistently spend $1200, your credit score may drop. The amount you owe accounts for 30% of your credit score. And if you want to have a high credit score, you need to stop racking up big balances. Having your balances low compared to your credit limits shows lenders that you aren’t tempted to overspend and you can handle large amounts of available credit. Experts advise to stay under 30% of your total credit limit, but the closer you are to zero, the better.
If you have a lot of expenses, keeping your balances low can be hard. But if you keep track of your limits and balances, you can stay on track in improving your credit score.
