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Check in With Your Credit-to-Debt Ratio

Money Tip: Check in With Your Credit-to-Debt Ratio

The biggest factor in your credit score is your payment history; at 35 percent of your score, punctuality has never been so important. While paying on time should be your number one priority in raising your number, you need to simultaneously work toward improving the second biggest factor in your score: outstanding debt. It accounts for 30 percent, so whittling down your debt will have a big impact on boosting your score.

If your balances are high, especially compared to the amount of credit available to you, your score will suffer. Calculate your credit-to-debt ratio by dividing your balances by the credit limits on your cards. Your best bet is to never carry a balance, but experts say if your ratio comes out to more than 35 percent then it's time to get cracking at paying down your balances. Throw more money at them each month to get your ratio down as quickly as possible, and always try to pay more than the minimum.


Join The Conversation
aimeeb aimeeb 8 years
Thanks Saavy!
ilanac13 ilanac13 8 years
this is something that i actually started paying more attention to over the past year - getting all my balances down so that i have more available credit.
Spectra Spectra 8 years
hithatsmybike--I think student loans DO affect it, because as the balance on our loans goes down, our rating has gone up and we have no consumer debt. I think if you have a mortgage and are paying that down, it decreases the debt you have as well.
hithatsmybike hithatsmybike 8 years
so is this why it would hurt you to cancel a credit card -- because it would lower your available credit? Because I have a department store card with a $6000 limit (I know, it's outrageous, I don't know why they thought I needed that) that I haven't used in a year, so I want to get rid of it, but I don't want that to hurt my credit score. Also, how do things like student loans factor into this or does it only pertain to consumer debt?
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