Credit Utilization: How To Get The Most Out Of Your Credit Score
What are the benefits of having a strategy to manage your credit card utilization?
You pay less (if any) in credit card interest.
It can help you build or maintain a healthy credit score.
It can lower your debt to income ratio, improving your purchasing power.
We put together a few recommendations to help you manage your credit card debt, depending on where you are at with your credit health.
For those that don’t have credit cards:
Credit card debt can be scary, and if not used as a tool for credit health, can lead to serious financial problems. However, if you avoid having a credit card, it could be negatively impacting your credit health. If you’re worried about having credit cards, but need to improve your credit score, we recommend opening 1 or 2 secured credit cards and having a strategy for how to use them. For example, a secured credit card, which is a line of credit secured against a small deposit, reports to the credit bureaus as a normal revolving line of credit. Using this credit card once a month, and paying it off after use, is a great way to start building the habit of using and paying off your credit card. Once you’ve established a habit of paying off your credit card(s) every month, you can start to increase your monthly spend for subscriptions, memberships, and other monthly expenses. This strategy can help you build payment history, maintain a low credit utilization, and reach your credit goals quickly.
Pro Tip: Be sure to pay off your credit card BEFORE the statement date each month to ensure your utilization is reflected correctly with the credit bureaus.
For those who are struggling with credit card debt:
Credit card debt can feel overwhelming. Over the past decade, we’ve helped hundreds of families reach their credit goals by encouraging them to choose a simple strategy, such as the debt snowball strategy, and focus on sticking to it each month until they hit their goal. Most credit card debt strategies are based on the same principle, which is to apply any excess funds to the principal balance each month. The key to winning your battle with credit card debt is to be consistent with your plan. To help improve your credit health, strive to get your credit card balances below 10-30% of the available credit limit.
For those who have credit cards but are looking to optimize their credit scores:
Looking for a strategy to help you boost your scores quickly? Carry a small balance between 1-9% of the available credit limit. Be sure to pay your balance to your desired percentage before the statement date to ensure the correct balance reports to the credit bureaus.
We hope these strategies help you reach your credit goals quickly! If you’re looking for professional help with reaching your credit goals, schedule a Free Credit Evaluation at www.premiercredco.com/services.