Credit Utilization

Credit Card utilization is important to understand in the early stages and is a little bit of a game you play with the on looking lenders, so let’s go over this again…

Spreading the wealth around is what I like to call it.

Credit Card Utilization :

Having only one credit card and higher charges on that card because you don’t want to juggle more than one credit account is doing more harm than good in terms of achieving that perfect score. Having multiple cards with high credit lines helps with utilizing your credit card responsibly.

*Example 1 : Having one Card with a limit of $500 and a balance of $450 would be a utilization of 90% ! (This can be a red flag for lenders because even know you may pay it off before the statement ends they don’t know if you are over budgeting and potentially not being able to make the payment.)

*Example 2 : Having two cards with a limit of $500 on each and a balance of $450 between the two, greatly decreased your utilization percentage from 90% to 45% and keeps lenders from worrying about over budgeting.

*Key point : Regardless of if you are paying off the card(s) each month is irrelevant in this category because the lenders are not looking for that in this case.

 

The Road Ahead :

Once you have established a solid credit score, Having and using only 1 card with a high credit line is where my services come in for the other cards you have had open and need to keep active but no longer use. (Age of credit history\number of accounts)

Example : Now having only one credit card with a high limit of say $10,000 and only spending $450 like the above example. Your utilization is slim to none because of the limit on the card. (4.5%) and lenders will not have any issue knowing you will be able to pay all the open monthly payment accounts you have.