Credit Score: The Importance of Keeping Track

Hello everyone! I hope you all are having a wonderful holiday season. Today is my first day of break and I must say I am excited to decorate the house!

Anyway, as it is the holidays, I know that most of us will be inclined to use our credit cards to pay for those pricier or convenient gifts, but think before you swipe! Unfortunately, utilizing your credit card more than you previously have lowers your credit score, though, thankfully, not by much.

For instance, last month I had about a 12% utilization on my DiscoverIt card. This means I was using only 12% of the $650 credit limit, which isn’t too bad, especially if you pay it off completely each month. This month, I increased it to 31%. Ouch! Lenders don’t like high utilization rates because those who charge more seem less likely to be able to pay it off at the end of the month. Hopefully my score won’t lower more than 10 points (hopefully only about 5). I’ll be able to tell you when I update my score for you.

Ways to lower your credit utilization include:

  1. Ask for a higher credit limit. I know this sounds strange, but sometimes, ask and you will receive. I learned this from the blog: ____ that I follow. The worst they can say is no, while the best would be that they heighten it. I recently received a raise of $150. However, please note that you have to have been paying on time and meeting their expectations in order to receive a credit limit increase.
  2. Live within your means. I know, sometimes having the newest thing is the best!…but do you really need the newest Iphone or the newest Xbox? The answer is no. My dad gets by just fine with his older Iphone and our Xbox Arcade (my sister’s), Xbox Elite (mine), and Xbox Slim (dad’s) get along just fine. The reason we have three is because my sister and I will move out, she already lives out of state most of the year. Buying just a degree lower can literally save you hundreds, so think of that. Also, limiting impulse purchases is a must.
  3. Don’t charge everything. One of my friends charges everything to his card, so he actually went over his limit by $90! He paid it off the next day though because luckily (and smartly!) he had all the money in the bank account. If you pay for some things off your debit or in cash, your utilization will lower because you simply just aren’t charging everything.

I hope this has helped.

Tell me, what have you done to lower your utilization? Are you able to charge everything to your card and still pay it off each month?

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