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How much of credit to use?

May 11, 2015 by · Leave a Comment 


Article Written by  : MLAVA Financial News

When lenders look at your credit, they consider credit utilization rate provided by one of three credit bureaus, namely Experian, Equifax and TransUnion. Credit utilization rate is also contributes to form your credit score. Credit utilization is the amount of credit you used out of what is allowed by the credit line to you. Generally lower utilization rates helps to get a higher FICO score.Credit

How to get a lower utilization rate? When creditors increase your credit limit, your utilization rate could go lower. Similarly, if a lender lowers your credit limit your utilization rate go higher giving you a higher utilization rate. Paying down more than the minimum required could help you to lower the balance and lower the utilization rate.

Higher utilization rate may indicate that you are overextending your credit facility. This may result in some of the creditors lowering the limit of available credit such as credit card limit. This could result in lower FICO score and you may won’t to avoid this situation by not overextending the credit limit. Higher balances are considered higher risk for many lenders. There is no magic formula to tell how much utilization is good. But many believe keeping the utilization around 50 percent of the limit helps to get a higher FICO score.

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