One of the factors that can directly affect your credit score is when your credit card is already maxed out. This is one of the most important that you need to consider if you really value your financial life. Everybody knows that they need to pay their bills on or before the due date, avoid bankruptcy and the like. But did you know that the balances of your credit card can be a factor whether you will be approved for a mortgage and the interest rate that you will get?
If you happen to have high balances on your cards, then you will really have a hard time getting a mortgage or getting the best interest rates. One of the things that FICO scores take into consideration is what they call credit utilization ratio. It simply means that they take the amount you owed divided by the amount that you are allowed to charge. It will provide a percentage. The percentage that you need is below 30% on every card that you have.
If you have a credit card that you always use and you have another one used for back up, you can try to transfer some of the balance to your back up card so you can have a better credit utilization ratio on all of your credit cards.
It can have a huge impact on your FICO score. It plays a very important role in boosting your credit score since 30% percent of your FICO score can be determined by the ratio of credit that you already used to the remaining credit. If you will try to calculate it, even if you have an excellent repayment history, no collections and you have no bankruptcies, you can still have a low credit score if you max out your credit cards monthly.
If you have a month or two that you exceed on your credit limit, your FICO score will really decline. Most of the people who get their credit report sometimes found out that the limit of their cards are not correct. Most of the time, the bank card company raises the credit limit without reporting it to the credit bureaus. It only means that you are actually spending more than your credit limit every month. When this happens, take time to clear it up and write to the customer service office of the credit card company and ask them to correct the mistake.