Your credit score is calculated based on information from your credit report. Thirty percent of your score is based on the money you owe, which includes how much of your available credit you are using.
How Available Credit Is Calculated
Your available credit is the sum of all your credit lines on your different credit cards. Your installment payments like mortgages are not included.
Debt to Available Credit Ratio
The ratio used in calculating your credit score is the amount you owe divided by your total credit limit. For example, if you owed $3,000 and your total credit limit was $10,000, your ratio would be 30 percent.
How Much to Use
CNN Money recommends that you not use more than 30 percent of your available credit. For the best credit scores, try to use less than 10 percent of your available credit.
Check Your Credit Report
When you check your credit report, make sure the credit limits are correct on your account or you appear to be over your credit limits because credit card companies are not legally required to update your credit limits with the credit bureaus. You can order a free credit report, once per year, from each of the three national credit bureaus: TransUnion, Experian and Equifax.
Fixing Errors
If your credit limits are incorrect, contact the credit card company and ask that they update your credit limit. Usually the credit card companies only update credit limits at your request.
0 comments:
Post a Comment