Q. I want to refinance, therefore I need to improve my credit score. Will lower my credit cards' limits help?
A. On the contrary, lower your credit cards' limits will hurt, rather than help, your credit score, for one simple reason - lower your credit card's limit will increase your credit utilization ratio.
What is Credit Utilization Ratio?
It calculates how much of your available credit you have tapped in a given month. Even you pay your credit card balance in full each month, the balance due on your credit card's statement will be reported and used in the credit utilization ratio.
The lower the credit utilization ratio, the better, since this ratio counts towards 30% of your credit score!
A. On the contrary, lower your credit cards' limits will hurt, rather than help, your credit score, for one simple reason - lower your credit card's limit will increase your credit utilization ratio.
What is Credit Utilization Ratio?
It calculates how much of your available credit you have tapped in a given month. Even you pay your credit card balance in full each month, the balance due on your credit card's statement will be reported and used in the credit utilization ratio.
The lower the credit utilization ratio, the better, since this ratio counts towards 30% of your credit score!
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