Have you been keeping a close watch on YOUR credit utilization ratio? Now that the holidays have officially begun, people are starting their shopping, whether it's primarily online or distanced in person. If you’re buying gifts, food, or decorations, that spending can quickly start to pile up.
Some people pay cash for all their purchases—but if you’re like a large part of the population, you’ll be using some credit cards to do your shopping.
One important key to maintaining good credit is keeping your credit utilization ratio in the proper range. Let’s take a look at what that means as we head deeper into holiday spending.
Your credit utilization ratio is simply the amount of revolving credit you are currently using compared to the total amount you have available.
It’s easy to figure out what your credit utilization ratio is. First, add up the credit card debts you have and divide that by the total amount of available credit you have. Since you want your answer expressed as a percentage, you will need to multiply the final result by 100. Here are a couple of examples:
These are examples of your credit utilization ratio for all your credit cards, but you could check your ratio for individual cards as well.
So, now you might be wondering:
Using the above example, if you increase your credit limit from $10,000 to $15,000, then your new credit utilization ratio would be 33% if you had $5,000 in debt. If you paid down the balance just a bit, you would be at 30%.
If you’re not sure where you stand with your credit score or credit utilization ratio, then now is the ideal time to ask for credit help. With the holidays upon us, you don’t want to take a chance of there being any problems with your credit.
Get in touch with a Certified Credit Diva here at Credit Diva of Dallas! We can help you get back on the path to financial freedom and fitness in time for those New Years' resolutions!