Know Your Credit Utilization Ratio

Before closing out a credit card, you should know your “Credit Utilization Ratio.” This is simply a measurement of all of your credit cards balances divided by the credit card limits. To maximize your credit score, this ratio should be 30% or less. When closing out a credit card, the scoring model looks closely at this ratio. If your Credit Utilization Ratio is less than 30%, then closing the credit card will not impact your credit score very much at all. However, if the Credit Utilization Ratio is over 30%, your score will be adversely affected by closing out a credit card. One reason why is that your credit card capacity is lower than before, and the model does not like this. So, be sure to know your credit card balances, limits, and Credit Utilization Ratio. Then, keep this ratio under 30% if you can and only close out a credit card when it is.

November 13, 2012 by · Leave a Comment

About James

James A. Williamson is currently the Sr VP of Sales Development for Shelter Lending Services (formerly Fairfield Mortgage). James joined Shelter in 1994 and was the company's top Loan Officer in GA for 20 straight years helping over 2500 families finance their homes. James now oversees an incredible group of Loan Officers in Atlanta while further building Shelter's Atlanta business.

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