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Credit score based on available credit, how does it work?


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Thanks for all your help!!!

Here is my question, after reading a bunch of threads I still have one more question about credit cards and balances.

Based on what I have read, you should not use more the 40% of the available credit. Meaning if I have a Capital One CC with a $1,000.00 credit line I should never use more then $400.00. OK simple…

But what if I have 5-6 credit cards all with different balances & credit limits, should I never spend more then 40% of the available credit of the combined credit lines or by each card?

Also, can I stick 3 or 4 of the cards in a drawer and never use them, will that help or do I need to show monthly activity?

Many thanks!!!


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First off, get rid of the capital one card. They always report your balance and limit as the same. So even if you only use 400, it will be reported as 400 limit and 400 balance. This means that you are always using 100% of your available credit with capital one. It sucks, but then what doesn't where credit is involved?

To answer your question, though, keep it at 40% of each individual card. That will help you much more than having high balances on two or three cards but no balance on one or two. I can't say for sure whether it will make a difference on your actual score, but even if your score is not affected, the lender you are applying to will see two or three cards with high balances as being negative no matter how many cards you have with little to no balance.

I think the opinions will vary a bit here on your second question. I think the general consensus, though, is that you need to have at least some activity on every card that you have. Personally, I would just charge twenty bucks on each of the cards you were going to throw in a drawer, then go ahead and throw them in the drawer and make ONLY the minimum payment on those cards each month. It probably sounds like it won't be worth the hassle, going and getting a money order or writing out 1 and 2 dollar checks every month, but that's what I would do. Hope this helps.

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You need to use your CC accounts each month, keep the balance BETWEEN 1% and 9%, have only two to four revolving accounts and pay them on time to reap maximum points. Scoring software actually penalizes you slightly for not using the accounts. (remember: deductions are about perceived risk...no data = increased risk) If you have high balances currently, aim for paying them all down to under 50%, then 40%, then 30%. Your score is not benefitted until each balance and the sum is under 30%. 31% - 50% is a wash.

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1% to 5% total utilization is best. Try not to go over 14% on any one card.

With cards that do not correctly report the CL, charge a large item and at the end of the 30 day return period, return the item. Then that high balance will be reported as the CL. Then you can use the card to make small charges without have a utilization issue.

With Visa and Master cards just charge $1.01 at a gas station once every 2-3 months and pay off the card 10 days before the bill is due.

For store cards make a very small purchase once every 2-4 months.

If one has say 10 revolving cards it's best to not have a balance on all or most of them in the same month. 4 or 5 is plenty.

Is NOT true that you need to carry a balance on a card or use a particular card every month in order to have good credit. Also there is no reason to pay any interest ever.


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