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Credit Utilization and Your Credit Score


The credit score system is one of the most obvious ways in which the rich get richer.  The more money you have, the more money you can borrow, but if you are not wealthy and you really need to borrow money, it is hard to find anyone to lend it to you.  The amounts you can borrow are much less, and borrowing is much more expensive in terms of interest and fees.  Raising your credit score is a slow process, but unless you have enough money to pay in full when buying a car or a house, it is the only way that you can afford major purchases.  Credit utilization is one of the factors that credit bureaus use in calculating your credit score.  Keeping your credit utilization low when you are living paycheck to paycheck is a challenge, especially when some of the methods you could use to lower your credit utilization can harm your credit score in other ways.  Fortunately, there are some workarounds that can improve your credit score even if your credit cards get close to being maxed out every pay period.  To find out more about improving your credit score when you can’t afford credit cards with a credit limit in the five figures, contact a Boca Raton credit repair lawyer.

Keeping Your Credit Utilization Low Is Easier Said Than Done

From the perspective of the credit reporting bureaus, it is good if you have credit available on your credit cards and other revolving loans, such as home equity loans, but it is bad if you use too much of it.  An ideal situation is if your balance on your credit cards is less than one third of your available credit.  For example, the credit reporting views will reward you by raising your credit score if your credit limit is $10,000, but your balance is only $3,000.  This is all well and good if you are so rich that credit card companies will issue you a card with a $10,000 limit, but good luck keeping your credit utilization below one third if your credit limit is only $500.  A single grocery haul can put you above the one third mark for credit utilization.

Other Ways to Raise Your Credit Score If You Can’t Get More Available Credit

Building your creditworthiness takes time.  If you have had your $500 credit limit for more than a year and you have never missed a payment, getting a credit limit increase could be as simple as calling the credit card company and asking nicely.  If you just got the card, though, you will have to keep making payments for a while before you can ask for a credit limit increase.  The bad news is that simply paying all your other bills doesn’t help your credit score as much as it should.  The good news is that some landlords have started reporting their tenants’ rent payments to credit reporting bureaus.  If your landlord does not, you can subscribe to a rent reporting app for tenants.

Work With a Debt Lawyer About Paying Off Your Debt

A South Florida debt lawyer can help you strategize about raising your credit score.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.



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