FICO Score, Utilization, and How Much is Owed
How much you owe makes up 30% of your FICO score and is sums of many different accounts like credit cards, car loans, and Mortgages.Another factor that is taken into account in your FICO Score is utilization and is defined as percentage of your balances to credit limits and makes up 30% of your FICO score.This is an important factor due to the relation of people defaulting on loans who are close to their limits.
The lower the utilization the better when figuring your FICO score. You should be aware that what your balance actually is and what you are judged on can be different. This is due to the fact that lenders report amounts due to the credit bureaus at a given point each month. So if you just paid off your credit card it still might show up on your credit report, but come off the following month.
You should try to keep your balances as low as possible to increase your credit standing.You should also make your monthly payments because the amount you owe are current loans is also taken to account.Meaning the comparison of the amount borrowed to the amount still owed over time.
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