Credit scores can be finicky…
The three credit bureaus (Equifax, Transunion, and Experian) all rely on algorithms to assess your credit “worthiness”
Yes, I said worthiness..
If a friend asked to borrow $100 from you, wouldn’t you want to know their past history when it comes to paying back their debts?
Your credit score reflects the likelihood of you paying back the money you have borrowed.
As you can imagine, if you do not pay a debt back or you constantly pay your monthly payments late your score will drop.
What if I told you your credit score can drop even if you pay all of your debts on time and consistently?
Credit utilization is the ratio of your credit card balances to credit limits. It measures the amount of your credit limit that’s being used. For example, if your balance is $300 and your credit limit is $1,000, then your credit utilization for that credit card is 30%.
Experts often advise to keep your score under 30% utilization.
According to the FICO scoring model, your utilization accounts for about one-third of your overall score.
Take a look at your balances and see where you might stand as you pay down the balances your score will jump right back to where it was before.
I did a Facebook Live video on this topic so you can watch here for more depth.