Credit Utilization

Utilization makes up 30% of your credit score. So to improve your utilization % you can pay down your balance to be 5 or 10% of your credit limit for each revolving credit account.

Pay down your debt

Make a list of all your accounts including the balance, interest rate, and credit limit. Next add a column for your utilization rate. Your utilization rate is calculated as:

Utilization Rate % = Balance divided by Credit Limit.

Here is an example, if you have a $1000 credit limit card and a $200 balance, your utilization is $200 / $1000 = 0.20 or 20%. From here, there are a few different strategies you can use depending on your specific situation.

If your goal is primarily to increase your credit score. Sort by the highest to lowest Utilization Rate. Then pay extra on the balances for accounts with the highest utilization rates. This will have a positive impact on your credit score.

If your goal is to reduce how much you spend. Sort by the Interest Rate highest to lowest. Then pay extra on the accounts with the highest interest rates. This will lower your overall out of pocket cost. Your objective with any strategy is to pay each account down to 5 to 10% of utilization and keep it there to increase your credit scores.

Finding money to help you pay down your debt may be difficult, but there are numerous ways to raise extra cash. You can have a garage sale, sell items on eBay, get an extra job, pull from your savings, borrow from friends, and cut your expenses. Any of these could be an option.