Credit – Never Use It All

I never knew that using credit can be bad.  I knew that it affects ones credit scores.  However, a recent article I’ve read, points out that using your credit card to the max, even though you pay it off every month, lowers your credit scores.  Imagine that.

It states that one should never use more than 25% of ones credit limit in any debt.  It doesn’t matter how much your limit is.  Just make sure you don’t go beyond the 25% ratio mark.  Apparently, credit scoring is not about the actual numbers but about ratios.  Here’s an exerpt:

When your credit score is calculated, substantial consideration is
taken on a simple calculation. This calculation is called your
“utilization”. It simply means, “How much of your total available
credit are you currently using?” In other words, “Is this person
spending money without keeping in mind it must be paid back?” Utilization is a huge factor when a credit score is calculated.

In addition to your overall credit utilization, individual credit account utilization is also taken into account. This basically means that if you have ANY individual account where the balance is over 25% of the credit limit, it is likely hurting your credit. Therefore, even if your overall credit utilization is under 25%, if any one of those accounts have a balance over 25%, your credit score is affected.

The full article can be found here.  Read and learn more about controlling your credit.

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