Alright… So I got two credit cards, both with $1000 lines of credit on them. If I were to charge an upwards of $500 – $600 on one card and not use the other, does the debt to credit ratio get calculated on a per card basis or is it reflected on your entire available credit across all cards? I am trying to increase my credit score and I was wondering if perhaps I should use both cards or if I can use just the one. Thanks.
9 Comments Already
July 8th, 2010 @5:49 am
bdancer2 – FAIL!!!!
A good credit score is NOT determined by your ability to pay the account in full every month, all lenders want to be sure that you’re capable of making the minimum monthly payment on your cards. Holding a balance on them isn’t ideal financially as you’re paying interest but if you can show you’re responsible enough to pay the minimums every month than your score will go up based on this.
Paying the balance every month shows lenders that you’re capable of paying the balance but may be financially irresponsible (they consider what would happen if you lost your income, would you settle for being able to pay only the minimum, and the answer to them is no.)
July 8th, 2010 @6:33 am
A credit score is based on a 12 month activity,. period.
July 8th, 2010 @6:55 am
Both, the lower you keep your balances all across the board and per card the better your score. It will not happen over night, age of credit matters and ways more heavily on your score so be wise with credit cards over the long haul and your score will take care of itself. Oh and do not charge more than 10% of the total available limit on your card for instance if it is $1000 don’t charge more than $100 it helps your score better as a whole when considering the ratio of debt vs available credit on your limits.
July 8th, 2010 @7:21 am
Credit scores are determined by your total credit history – all debts, all available credit, all payment histories. The best thing would be to charge “lightly” on both/all cards and pay the full balance on them each month. Those positive payment histories help to “build credit.”
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July 8th, 2010 @7:53 am
Both are factors, but your overall debt-to-available-credit ratio is the key variable. Credit lenders don’t like to see that you’re maxed out on a credit card because it implies that you are desperate for credit, so I would avoid getting too close to the limit on any one credit card. However, it is more important that you try to use less than 60 % of the total credit available to you.
If you’re planning on paying down the debt right away, it really doesn’t matter. However, if you’re planning on paying the balance down slowly, I would use my credit cards based on the interest rate. If both cards have about the same interest rate, then I would say use them both equally. But if one has a much better interest rate than the other, I would use it even if you are spending upwards of $600 because the overall debt-to-limit ratio is much more important than an individual card.
Credit card debt to limit counts both by individual account and overall — overall is a much bigger factor. However, carrying balances on your accounts does nothing extra to improve your score. It just cost interest.
If you want to build your score, you have to use both cards. An idle card does nothing to add to your credit/score. Use both and pay the balances in full every month. This will give you good payment history on both accounts.