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.
Fact: The less of your available credit you use, the better it is for your credit 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:
Take the CUR
There are 3 ways to improve your CUR:
CUR Best Practices: Be proactive
A great credit score is 750++ on all credit scoring models. Having such scores is an important part of living a MoneySmartLife.
Here are 11 benefits of having and maintaining great credit scores.
5/14/2019 0 Comments
The recent announcement of increased tariffs on Chinese goods will increase the price for thousands of consumer goods that are purchased every day. Here is a very abbreviated list:
On The List
Not On The List
If you have done some things right and your financial house appears in order, a relative will ask you to co-sign a loan for them. Co-signing is only one of the ways available to help your credit-challenged relative. There are other ways that may deliver the desired results with less exposure and risk for you, especially with a little bit of planning.
Let’s look at your options and so you can make an informed choice about co-signing.
When you co-sign you become a JOINT account holder. Each and every member on a joint account agrees to be individually responsible for 100% scheduled repayment of the outstanding debt regardless of the other members' payments or promises. When you co-sign if a payment is missed, your credit score will receive the full negative impact of the late payment.
This could be catastrophic if it compounds an already diminished credit score. No doubt, the new co-signed loan’s high-balance-to-limit ratio, and short history have already reduced your credit scores several points. That happened just by signing up; missed payments or not. So be prepared to take a credit score hit when you co-sign.
How long will it take your score to recover from these factors assuming a pristine repayment history? The answer depends on several factors. Credit scoring is an art and a science. Whatever calculations the algorithm conjures to determine our scores, the following is empirically factual for every credit score. They go down a helluva lot faster than they rebound. It is never down one month; up the next for any credit scoring model in existence regardless of the previous history.
If you do, you will almost immediately transfer your credit history to theirs. And without any risk or exposure to new debt for either of you. Now, this strategy will not work for impulse or emergency “gotta have a co-signer or else “ situations. But adding someone as an authorized user can be the gift that keeps on gifting. As with most successful credit score improvement strategies, the more time you give this one, the better.
But the gift isn’t for everyone. Here are six questions whose answers will help you decide if your situation is a fit for the authorized user strategy:
Good credit grandparents can leave good credit legacies safely to multiple generations since there are rarely limits on the number of authorized users. Just make sure that each of the six questions has the right answer.
It is not just how much money you make; it's how much you keep that makes the difference in your life.
Getting the most for your money is one way to do that. Making the right buying decision is an important skill to master. And a great habit to develop. Here's a way to do that:
Comparison shop everything, all the time, not just the "big items." To do that successfully you must be able to compare prices on your most frequently purchased items. To do so, you must use Unit Pricing. You can compare “apples to apples” with the Unit Price. Here is how to know and evaluate the unit price: