Top Ways to Manage Your Debt Ratio

The debt ratio is the difference between the amount of debt you have charged versus the amount of money the creditor has authorized you to use or your credit limit. The difference is your debt ratio.

This can also be referred to as the available revolving (credit card) credit. If your credit limit is 5,000 dollars and you have charged 2,500 on the card, your debt ratio is 50%.

The debt ratio accounts for 30% of your FICO score, making it the second-highest factor the credit agencies consider when looking at your credit. Maintaining your debt ratio can impact your credit score, but unlike payment history, not everyone knows how to ensure their debt ratio is a positive force on your credit score. Here are a few tips for you to make sure your debt ratio is not a drain on your credit score:

Maintain Your Total Revolving Credit 

• Don't ever close credit cards if you can avoid it. The more cards you have open, the higher your total of available credit. Credit calculating software takes your TOTAL available credit versus TOTAL debt into account. Closing a credit card will decrease your overall available credit without decreasing your debt.
• Keep your debt even across your credit cards. It is better to have four credit cards with a 20% debt ratio than one card with an 80% ratio and three cards with no debt.

Know Your Limits

• Keep the balances on your credit cards as low as possible. It's best to keep your balances below 30% on any card. However, if your finances do not allow you to reduce the balance to 30%, aim to keep all of your balances below at least 50% of the credit limit on that card.
• The FICO software ranks your credit debt based on levels. If your credit card debt exceeds 75% of your credit limit, it will cause severe damage to your credit score. The next limit begins at 50%, then 25%.
• If your debt is high and approaching that 75% mark, call your credit card company and request an increase in your credit limit.

Check Your Credit Report Regularly

• Look at your credit report to ensure the credit card companies have accurately reported your credit limit. If they haven't reported your limits, the FICO software will read all your cards as maxed out.
• Report any errors on your credit report immediately. The sooner errors are remedied, the better.
• Maintain communication with your credit card company. Call them if suspicious charges are on your account or if you need to adjust your payment schedule.

By maintaining your debt ratio, you can ensure your credit score is as high as possible. While a solid debt ratio alone is not the only element in calculating your FICO score, it is a significant portion. Have questions about your credit score or need help repairing your credit? Contact Credit Repair Enforcers today!

About CreditRepairEnforcers.com:
Get the benefits and experience of a firm that concentrates on helping people with credit problems without paying huge setup fees. Credit Repair Enforcers has successfully removed erroneous, unverifiable, outdated, and inaccurate information from our client's three credit reports for over 20+ years. We assist with all things credit repair and credit building. We have helped people who need assistance with personal, business, and corporate credit repair and credit building. Credit Repair Enforcers fight for your credit rights!