Credit utilization makes up about 30% of your total credit score and yet most individuals do not comprehend what credit utilization is. The concept is pretty easy to understand and is expressed as a percentage. Generally, the higher your credit utilization percentage the lower your credit scores. Every tradeline that is on your credit report has a figure assigned to what credit is available to you. This would be the beginning loan balance or the credit limit on a credit card your credit cards. Same with a credit card. Now if you have paid on that mortgage and your balance is only $50000 this remaining balance is considered your Credit Debt . So if you have a mortgage for $100000 and your remaining balance is $50000, your credit utilization is figured as follows:
Credit Available = $100000, Credit Debt = $50000, Credit utilization is 50%.
Simply put, keep your credit usage low and it will help your credit score.
This means that if you have credit card debt , and you can keep it below 30% that will be best and make lenders much more comfortable when deciding to provide you with credit.
Mortgage lenders that see you keeping your credit utilization number down are more likely to provide you with a loan because it will appear to them that you are able to manage your credit properly. Pencil out what your credit utilization percentage is and then focus on trying to lower that percentage.
Keep this is mind if you work with a credit repair company.
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