If you are looking to maximize your credit score to it’s fullest potential, here’s a few key facts that are always good to know.
In order to have a positive FICO credit score, you must have open and active credit card accounts with a long positive payment history. Believe it or not, 35% of your score is based on your credit card accounts, and what we call a revolving debt ratio.
So what is a revolving debt ratio?
It is the comparison of balance vs available credit limit.
Allow me to break it down in a simpler manner..
EXAMPLE
Say you have a credit card with a credit limit of $1,000 – and you have used $900.00 of that $1,000 credit limit, you then have a 90% debt ratio. If you have a $500.00 balance of the $1,000 credit limit, you then have a 50% debt ratio. The revolving debt ratio allows the credit bureaus to understand the difference in your available credit vs your revolving debt.
Now the 35% of this portion of your score does not take into account mortgages, auto loans, etc., but focuses primarily on your credit card accounts solely. This is why it is important to have open and active credit card accounts with a low debt ratio, to really gain and maximize your credit scores.
Heres a credit tip to help boost your scores, the lower you percentage of your debt ratio, the higher your credit score will be. Typically, you will see higher scores with a revolving debt ratio of 30% or lower.
Questions on how to boost your credit scores?
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