Let's talk credit scores and how they're impacted by your credit card usage. You've probably heard the advice to keep your credit card spending under 30% of your limit for a better score, right?
Well, here's the truth: While that 30% guideline is helpful, going even lower can have an even bigger positive impact on your credit score.
Why does this matter? Your credit utilization—the amount of credit you're using compared to your total limit—makes up a whopping 30% of your credit score. That's a big chunk, so managing it wisely is crucial.
So, how do we do it? Aim for a credit utilization rate of 12% or less, ideally targeting 5-8%.
Here's how to make it happen:
Know Your Dates: When you get a new credit card, call the number on the back and ask for two important dates—the due date and the statement date. Write these down.
Stay Low: Make sure your credit card balance is at or below 12% before the statement date rolls around. Once it passes, reset the balance.
Avoid Minimum Payments: Don't fall into the trap of paying only the minimum balance. Not only does it hurt your credit score, but it can also lead to financial trouble down the line.
For those of you eyeing larger lines of credit for investments, maintaining a low credit utilization rate is key. Paying down your balance a day or two before the statement date shows responsible credit behavior when your spending is reported to the credit bureaus.
By staying on top of your credit utilization and strategically managing your balances, you can boost your creditworthiness and open up doors to better financial opportunities.
Remember, your credit score isn't just a number—it's a reflection of your financial health and responsibility.
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