Credit Card Balance And Credit Scores
Did you realize that lower credit card balances means higher credit scores. If you have perfect credit and have not been late on any monthly payments and still have a low credit scores, you need to see if you have maxed out your credit cards. Even though you make all of your credit card payments on time as well as other monthly debt payments on time, a high balance on your credit cards will definitely yield you a lower credit score. Bottom line is that lower credit card balances means higher credit scores.
The Lower Your Credit Card Balance The Higher Your Credit Scores
If you have a $1,000 credit card and you want to optimize your credit score with that particular credit card, the key is to have the lowest possible balance but great than zero. Do not have a zero balance on your credit card either and we will explain why. Always leave a balance of $10.00 on your credit card and there is a valid reason for this.
Rebuild And Re-Establish Your Credit With Secured Credit Cards
If you just had a financial meltdown such as a bankruptcy, foreclosure, judgments, collections, late payments and/or tax liens, your credit scores are probably in the low 500’s or even in the 400’s. The best way to rebuild your credit is by reestablishing your credit immediately. The best way of reestablishing your credit is by getting 3 secured credit cards. Each credit card should boost your credit scores by 20 to 50 points if you optimize them the way I will explain.
Credit Bureaus And FICO Scores
When a credit reporting agency calculates your scores, it uses a special formula. With credit cards, the lower this special score is the higher your credit score is. So, if you had a $1,000 credit limit credit card and you had a balance of $900, your special score is 0.90. This is a high number and the higher the number, the worse your credit score. If you had a balance of $100 and your credit limit is $1,000, your special number will be 10%, which is $100 dollars divided by your $1,000 credit limit. The lower this special number is the higher your credit score. Remember, lower credit card balances means higher credit scores.
Credit Utilization Ratios
You do not want to have a zero balance on your credit card if you want to optimize it to its fullest effect. That special number cannot be zero. The lower that special number is the better but not zero. If you had a $0 balance on your credit card, then if you divide $0 by your $1,000 credit card limit, it will yield zero which you do not want. Again, lower credit card balances means higher credit scores but the balance must be greater than zero.
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