Common sense tells us that paying our credit card down to zero each month will boost our score…but, that may not be the case.
Get to Know Your “Utilization”
This is certainly a great habit to get into. But what’s more important is the amount owed…this is often referred to as utilization or how much of available credit is still available. Quite simply, if you have a $1,000 credit limit and your statement shows an outstanding balance of $500, you have 50% utilization. It is best to keep utilization below 25%. Maxing out credit is seen as a negative on your credit report and accounts for 30% of your credit score.
Pay attention to what is reported on your statement and if it is higher than what you would like consider making additional payments prior to your lenders billing cycle.
What Does Your Credit Report Look Like?
Take a few minutes to get a free copy of your credit report by visiting www.annualcreditreport.com.