Tuesday, December 15, 2009

Easy Way to Raise Your Credit Score

One of the easiest ways to raise your credit scores is to maintain the correct ratio of debt to maximum credit. To calculate the ratio, divide the balance on your credit card by the credit limit. For example, if you owe $1500 on a credit card and your credit limit is $2000, you would divide 1500 by 2000 and get a ratio of .75 -- another way of expressing that is to say that you owe 75% of your credit limit.

Here's how to use that information:

• If the ratio is between 70% and 100%, it lowers your score the most.
• If the ratio is between 50% and 70%, it lowers your score a bit less.
• If the ratio is between 30% and 50%, it lowers your score even less.
• If the ratio is between 0% and 30%, it adds the maximum amount of points to your credit score.

If you pay down the balance on your credit cards to below 70%, or below 50%, or below 30%, your scores will go up because you are in a lower ratio category. Many times, someone will be able to raise their credit scores enough to qualify for a mortgage just by paying down the balances on one or more of their cards.

The scores probably won't go up immediately because the creditor (the credit card company) does not immediately report the new balance to the credit agencies. However, it is possible to expedite the process if someone needs their scores raised immediately.

No comments: