At Last! The Secret of How to Raise Your Credit Score FAST Finally Revealed!
When you are trying to purchase a house, get a new car, or just get new credit cards it can be a highly stressful situation to pull your credit and realize that your credit score is much lower than you thought.
Many times, you don’t have the ability to wait months for your credit to be restored with a traditional credit repair process and you need solutions NOW! There are a few methods that you can use to raise your credit score fast, and in this article we will be talking about one specific method which is super fast and can give you almost instant results – and that is learning how to effectively manage your credit utilization.
What is Credit Utilization and How Does it Affect Your Credit?
Although effective credit utilization is one of the easiest ways to raise your credit score fast, it is often something that is extremely misunderstood.
The simplest way to define it is that – credit utilization refers to how much you are using the available credit that you currently have.
In other words, let’s say that a person has a credit line of $25,000 and they are using $24,900 of that credit line. Creditors consider that this person will pose a bigger credit risk than someone who takes out a $25000 credit line and only used $1,000 of that credit line.
Of course, this doesn’t always mean that you are a bigger credit risk, especially if you have other lines of credit that you are able to pay off quickly. But in some cases, people take multiple lines of credit and they have them all maxed out, this makes them a bigger credit risk than someone who doesn’t use their credit line as much.
There are a lot of mysteries about the way FICO uses the utilization rate to calculate your credit score, it is never an exact science. However, as you can see in the pie chart above,credit utilization makes up a very big portion of your credit score. How you use your credit in terms of your overall payment history and the amount of money owed vs the amount of your available credit is about 65% of your overall credit calculation! This should give you a good picture of why your credit utilization is so important.
The Funny Secret About How to Manage Your Credit Utilization
FICO does not measure your average utilization rate, instead it bases your score on the highest utilization rate of all of your cards.
For example, if you own two separate credit cards, and each of these cards has a $5,000 limit, but one of those credit cards was maxed out while you hadn’t even touched the other credit card.
What happens to your score?
The maximum utilization rate would equal 100%. So in this example, there will be a negative impact on your credit score.
Now let’s say that you had the same two credit cards with the same credit limit of $5,000, but instead of maxing out one of those cards, you used $2500 of the $5,000 credit line on each one of the cards.
In this case, the maximum utilization rate would only be 50%.
Do you see what a difference there is in the two examples?
In both examples, the total credit used is the same, ($5,000), but the way that it is used is completely different.
In one instance, all of the credit is taken from one place, in the other case, you are balancing your credit between two cards.
More Important Things to Know About Managing Your Credit Utilization
Ideally, you should aim to have a utilization rate of 30% or less on each of your credit cards. Even if you have just one card that has a utilization rate over 30%, your max utilization will increase and your overall credit score will be affected.
Remember, your credit utilization rate is important!
In fact, in a study done of 70,000 different credit scores, researchers discovered that those people who had a credit score of 720 and above also tended to have a utilization rate of 20% or under.
At the same time, those people who had a 0% utilization rate usually had a poor credit score. While you would think not ever using your credit would have a positive impact on your score, it actually works quite the opposite.
In order to maximize your credit score, you must actively use your credit – but the best way to do this is to pay your balance off in full every month or keep your balance below 30% utilization at all times.
Use these simple tips to raise your credit score fast and get a 700+ score in record time!