Your “credit utilization rate” (CUR) is how much credit card debt you have compared to your credit card’s limit.
This directly affects your credit score, which can have a HUGE impact on everything you do financially. Here’s what you need to know about CURs.
#1: High Or Low CUR?
Do you always pay off your credit card in full, or “carry over” some of your debt? If you pay everything off, your CUR will be zero. But if you carry over a lot of debt month-to-month, your CUR will be high. So what exactly is the best strategy?
#2: The Ideal Utilization Rate
Experts recommend keeping your CUR below 30%, meaning the balance you carry over is 30% or less of your credit card limit. This tells lenders you can manage your finances. Having a higher CUR indicates you’re having trouble paying your debt, which is a bad look!
#3: Credit Score Changes
Paying down your debt will lower your CUR – but it often takes weeks for reporting agencies to update your credit scores based on recent payments. So If you make a payment, but don’t see your score change immediately, don’t panic!
The system is confusing! But staying on top of your credit utilization will help you keep your credit score high, which can have a huge impact on your pursuit of financial liberation.