Tip:

Your debt-to-credit ratio, also known as your balance-to-limit ratio or credit utilization rate, is the percentage of your available credit you are using. You can calculate your utilization ratio on your own. You simply divide your balance by your available credit line. Most credit experts suggest keeping your credit utilization rate below 30%, and less than 10% is even better. For credit-scoring purposes, credit utilization is calculated both by individual card and overall revolving credit. Potential lenders see a higher ratio as a potential red flag and you may have trouble getting approved for a loan or mortgage if yours is high.

To improve your debt-to-credit ratio you can pay down your debt or increase your credit limit. Either option (or both!) will lower your ratio. A third option may be to make multiple payments during the month to keep the balance owed at 30% or less of your limit.

 

Knowledge