December 8, 2013

What is the 2nd best way to improve your credit score (first, is paying your bills on time)?

2 thoughts on “December 8, 2013”

  1. Katherine Graham says:

    Credit utilization: Banks give you access to a certain amount of money and how much you actually use is up to you. Banks want you to use less than 30% of the credit available to you. Finley recommends you use less than 10%.

  2. Mike Finley says:

    Well said, Katherine. Let’s take a look at how this can work.

    You have two credit cards with credit limits of $2,000 on both, totally $4,000. You pay your bill in full at the end of each month on one of them and keep the other as a back up. Your average balance each month comes to $1,000 per month which ends up being 25% utilization ($1,000 divided by $4,000). This is good, but you can do better.

    You can contact your credit card issuers and ask for increases in your credit limits (this does not mean you will use your card anymore than you normally would). Let’s say you are able to get an extra $2,000 on each, totally $4,000. Now you are using 12.5% ($1,000 divided by $8,000). This will improve your credit score and it won’t cost you a dime. Strive to get that number under 10% ($1,000 divided by $10,000) and you are golden! Knowledge is POWER!

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