Increasing Credit Scores
Updated: Nov 14, 2019
Taking the steps to increase your credit scores is an important part of your financial health. There are ripple effects of having a good credit score such as better terms on your mortgage or an easier process.
One of the fastest ways to improve your credit score is pay attention to the balances on any credit cards compared to the credit limit. This is called debt utilization and is a significant part of how your score is calculated. If your credit limit on a card is $1000 and you have a $500 balance, your debt utilization is 50%.
The debt utilization gets calculated on individual accounts and as a ratio for all of your revolving/credit card accounts combined.
When it comes to credit scoring there are two major thresholds to target for your debt utilization ratio – 50% and 30%.
As you work on your scores it may be tempting to use money you have to pay down large balances. If the aim is to increase scores you can often benefit more by paying attention to which accounts are close to these thresholds and paying the balance down accordingly.
After that point look at the total debt utilization among all your revolving accounts and target these thresholds to help improve your credit scores.