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Credit Card Utilization


What is Credit Utilization?

Credit utilization is the ratio of your credit card balances to credit limits. For example, if your balance is $300 and your credit limit is $1,000, then your credit utilization for that credit card is 30%. To calculate your credit utilization simply divide your credit card balance by your credit limit then multiply by 100. The lower your credit utilization, the better. That shows you're only using a small amount of the credit that's been loaned to you.

Your credit score - including your credit utilization - is calculated based on the information on your credit report. Because credit card information is updated on your credit report monthly and not real time, your credit score may not reflect the most recent changes to your credit card balance and credit limit.

Instead, the balance and credit limit as of your credit card account statement closing date are what's used to calculate your credit score.

How Credit Utilization Factors Into Your Credit Score

The FICO scoring model looks at your credit utilization in two parts. First, it scores the credit utilization for each of your credit cards separately. Then, it calculates your overall credit utilization, that is, the total of all your credit card balances compared to your total credit limits. A high credit utilization in either category can hurt your credit score.

Credit utilization is 23% of the VantageScore, another type of credit scoring calculation, but the score also considers your balances as 15% and available credit as 7% of its score. In total, the amount of your credit card debt affects 45% of your VantageScore.

Why Is a High Utilization Bad?

Remember that the purpose of a credit score is to gauge the likelihood that you will repay money you borrow. Certain factors make us all more likely to default on credit obligations. One of those factors is high credit card and loan balances. Higher balances are more difficult to afford and could indicate that you're overextended. Your credit score adjusts to high utilization to show prospective lenders that there's an increased risk of you falling behind on payments.

Keep Your Utilization Low

You can't trick the FICO score into thinking your credit utilization is low by paying your balance in full at the end of each month. If your balance is high when your issuer sends your account information to the credit bureaus, then the credit utilization used in your credit score will also be high.

Fortunately, you can maintain a low credit utilization by keeping a low credit card balance - below 30% of your credit limit is best. To ensure your credit report reflects a low credit card balance, make sure your balance is low by your account statement closing date (the date your billing cycle ends). Check a recent copy of your billing statement to gauge your next account statement closing date.

If, for some reason, your card issuer cuts your credit limit, it's important to reduce your credit card balance to lower your credit utilization. This is especially true if your lower credit limit is at or near your credit card balance.

Fortunately, a high credit utilization won't hurt your credit score forever. As soon as you reduce your credit card balances (or increase your credit limits), your credit utilization will decrease and your credit score will go up.


 
 
 

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This program is not intended to be used as a method of defrauding banks, creditors, or any other organization that requires your social security number as identification. This program is not a method to avoid paying your existing or future debts. If you created the debt, you are responsible to repay that debt. However, we will not support, facilitate, nor condone any fraudulent activity. The information here is informational purposes only and for you to use at your own risk. We are not lawyers or any legal services. We have a non refund policy because of the work needed to give you the info.  

 

Affordable Financials has posted this message in plain sight on the front page of our webpage so consumers can be aware "CPN's" are defined as any 9 digit number which can be used for credit; such as a SSN, ITIN, TIN, or EIN and it is very clear the largest warehouser of converted 9 digit government issued numbers; such as, ITIN, TIN, SSN, and EIN ARE IN FACT FOUND THROUGH OUT THE BANKING WORLD AND WITHIN THE BANKS DATABASE and ATTACHED TO CREDIT AND LOAN FOLDER LEGALLY ORIGINATED BY THESE SAME BANKS.

IT IS OUR STATEMENT THAT Affordable Financials IS NOT ENGAGING IN ANY PROHIBITED BUSINESS ACTIVITIES SUCH AS: A. Representing, expressly or by implication, that through the use of our products or services, consumers can alter their identifying information to conceal adverse credit information from consumers' credit records, credit histories, or credit ratings, including but not limited to the use of Employer Identification Numbers ("EINs"), Taxpayer Identification Numbers ("TINs"), or alternative Social Security Numbers in lieu of the consumers' own Social Security Numbers; B. Representing that the building of a new credit record by applying for credit using an EIN, a TIN, or an alternate social security number instead of a consumer's own social security number is legal; C. Misrepresenting any material fact concerning the ability of our products or services to perform or provide any credit-related function for consumers, including but not limited to improving consumers' credit reports or profiles, consolidating debt, obtaining or arranging a loan, or obtaining or arranging any extension of credit; and D. Misrepresenting any fact material to a consumer's decision to purchase our products or services. E. Representing, expressly or by implication, that through the use of our products or services, consumers can alter their identifying information to conceal adverse credit information from consumers' credit records, credit histories, or credit ratings, including but not limited to the use of Dun & Bradstreet Numbers ("DBNs"), Employer Identification Numbers ("EINs"), Taxpayer Identification Numbers ("TINs"), or alternative Social Security Numbers in lieu of the consumers' own Social Security Numbers; F. Representing that the building of a new credit record by applying for credit using a DBN, EIN, a TIN, or an alternate Social Security Number instead of a consumer's own Social Security Number is legal; G. Misrepresenting any material fact concerning the ability of our products or services to perform or provide any credit-related function for consumers, including but not limited to improving consumers' credit reports or profiles, consolidating debt, obtaining or arranging a loan, or obtaining or arranging any extension of credit; and H. Misrepresenting any fact material to a consumer's decision to purchase our products or services.

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