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Hi I'm Jean Chatzky and this is your Savvy Money Minute.
Brought to you in part by Alliant Credit Union.
So you want to raise your credit score so you can get
lower credit card interest rates, easier credit,
even better new job prospects. You need to understand
credit utilization.
I know it sounds complicated but it's simple.
It's a ratio. How much credit you have
versus how much you use and it can make up to twenty to thirty
percent of your credit score. Example: say you have an outstanding balance
of four hundred dollars. Your credit lines?
Two thousand dollars. Divide your debt by
your credit. In this case it's point two or twenty percent.
That ratio is great. A Credit Utilization Ratio of
under 30 percent helps your score. One common mistake?
Thinking that closing a credit card account will raise your score.
Our friend Lori did that but look at her ratio.
Fewer cards means a lower credit limit. To raise her score,
paid down her balances by a thousand dollars and
keep her credit lines open at five thousand dollars and she's at
twenty percent. Here comes a better credit score
and better financial health. I'm Jean Chatzky for your SavvyMoney Minute.