Time your debts to improve your credit report score
It would be nice if everybody had the choice to pay down or pay off their revolving accounts to under 10% credit utilization. 10% is the magic number that will give you the highest credit report score. Every dollar owed that contributes to more than 10% of credit utilization deducts points from your credit report score. The number of points deducted, although not known exactly, accelerates rapidly beyond 50%.
The difference between 20% credit utilization and 80% credit utilization could mean 100 points on your FICO credit report score.
How can you use this credit utilization information?
If you are thinking about a mortgage loan or a refinance in the next several months then you must consider the affect that getting a car loan today would have on your credit report score. If the car loan was $30,000 and would only have a couple thousand paid down before you applied for that mortgage loan you would suffer a hit on your credit report score and pay a higher mortgage loan rate because of the 93% credit utilization on the car loan.
Here is another example. You have a 730 credit report score and are shopping for a new car. Your 730 FICO score will qualify you for a low auto loan rate. Before closing the deal on the car you buy a $3,900 HDTV with 100% financing from the electronics store. The store gave you a credit line of $4,000 for the TV.
You can make the payments on the TV without affecting your ability to pay a new car loan – no problem, but because you just bumped up your credit utilization by several percentage points you probably dropped your credit report score by 20 or more points. 20 FICO points doesn’t sound like much but in this case it would be enough to disqualify you for the lowest rate auto loan. You will now pay hundreds, if not a few thousand, more in interest payments over the life of the car loan.
You get the point. If a major financing is in your near future do not increase your credit utilization percentage. Better to wait until after you complete the big purchase and pay a little higher interest rate on a TV than paying a higher interest than you could have on a house or a new car. Time your debts to improve your credit report score.
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[...] Time the amount of your debts to improve your credit report score… Related Posts:Time your debts to improve your credit report scoreOne thing you can and must do to improve your credit report scoreWhy closing an account could damage your credit report scoreTwo things you can do today to raise you credit report score tomorrowHow opening an account can improve your credit report score Category: Fix My Credit Tags: credit card utilization, credit report score calculation, creditscore tip Social Bookmarks: – (what´s this?) – spread the word! (more bookmarking services) [...]