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FICO Score and Credit Utilization

August 28th, 2019 6:04 PM by Sam Kader

Your FICO score is a very important number that determines a wide range of home financing. It determines whether you are qualified to obtain FHA Financing Vs. Conventional Financing and it also determines what rate and loan amount you will be given.  

As your revolving credit card balances rise, your credit score will begin dropping long before it reaches the recommended utilization limit of 30% of your available credit. The common wisdom is to keep revolving debt below 30% of your available credit line. For example, if you have a Visa card with $1,000 credit line, keeping your current balance at or below $300 is recommended. I recommend that you start at 50% first especially if you are just starting to keep your budget under control. Experts say that your FICO score starts taking a hit even at 5% credit line utilization and continue to drop as your utilization rate climbs towards 30%. The actual decline varies a little from person to person. For example, those that have a lot of depth in their credit report will not see the same drop as someone who has only one new credit card.  

Maintaining a good credit score is a lifelong process. However, if you are cramped for time and need a quick fix - Credit Utilization is one criterion that you can work on quickly to boost your FICO score. Here are other ways on how you can increase your FICO score. 



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