Take the Credit Score CUR

The proportion of balance to limits on revolving charges

While your payment history is the most heavily weighted element in credit scoring models, how you use and pay your credit cards accounts comes in a close second.  The proportion of your credit limit you have already accessed-regardless of payment history-affects your score in most scoring models. Here are some key takeaways:

30% of your credit score is determined by “Proportion of Balance to Limits on Revolving Accounts.” It shows how you use and pay credit cards and other types of revolving debts.

Below is a formal definition. For me, a revolving account is one where you can access credit to the pre-established limit without further approvals from the creditor. Your monthly payment can be as low as an agreed-upon minimum to the full amount owed. Credit cards, home equity lines of credit (HELOC) and personal lines of credit are all examples of revolving debt.

• Definition: Revolving debt consists of open-ended accounts, usually with variable interest rates, predetermined credit limits, and payments that are calculated as a percentage of the unpaid balance. ~Lending Tree

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Fact: The less of your available credit you use, the better it is for your credit score.

• 25% or less for a good score
• 10% or less for a great score

The proportion of balance to limit is called your Credit Utilization Ratio (CUR). Your credit utilization ratio is calculated by BOTH individual tradelines and in the aggregate. Here are some CUR considerations:

• Lowering or raising your credit utilization ratio (CUR) is the fastest way to affect your credit score. This can happen in 30 days or even “instantly” in the case of a rapid rescore in the mortgage approval process.

 

• The good news is that how you use your available credit is totally within your control.

 

• An informed choice is always important when you choose to access your credit in an impactful way. For many, credit limits are an inherent part of their safety nets. In such situations, when hit by sudden necessary debt load, one is banished to credit utilization ratio (CUR) purgatory and a lower credit score. Lower your credit utilization ratio (CUR) as fast as possible and return to credit score glory.

Take the CUR

There are 3 ways to improve your CUR:

• Lower balances on revolving charge accounts
  • Costs you money
  • Lowers total debt load and improves your debt to income ratio (DTI)
• Have your credit limits raised by your creditors
  • Based on your payment history and other requirements imposed by the creditor
  • Based on overall credit score and (CUR)
  • Will generate a hard inquiry on your credit report
• Become an authorized user
  • Find the right authorized user
  • Does not work with Vantage Score models
  • Increases your available credit limits
  • No inquiry

​CUR Best Practices:  Be proactive

• Ask each creditor: 
  • When your account is scheduled for a limit increase review. If they increase your limit without you asking, it doesn’t generate a hard inquiry.
  • Take note of your accounts' credit limit review anniversary dates and seek annual limit increases without a hard inquiry. Contact them to find out the results of the scheduled review or watch your statement for a limit change.

• Stop using low limit credit cards when possible.
  • Don't close them if they have a good payment history.
  • This can be especially hard if you are using secured credit cards to build your credit.

• Strategically open and stringently underutilize higher limit revolving accounts

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Maximizing First Time Homebuyer Credit Score