The difference between loans that are open and loans that are open with balances is pretty obvious. You have a loan with or without a balance. The credit bureaus scoring modules look at number of open loans with no real consequence unless is too many or too few. Too many is about 20 open and too few is none. However, there is also a problem with having too many loans with balances and that number seems to be around 8. We see credit reports drop in scores and have reason codes that pertain to having too many accounts with balances right around that number.

The secret is to keep just enough loans with balances in a number to do the most good and stay away from having too many or too few.

I saw a well dressed lady the other day at the check out and opened a binder with pages and pages of credit cards instant approval experian for her to choose from. I was astounded at the number of credit cards that she had and wondered just what her credit score could be. She couldn’t have that many cards unless she had a pretty good score, so she would have to pay them off each month to keep from losing her credit and losing the opportunity to get more cards. But I have to wonder, why have so many cards and complicate your life with all those bills and trying to decide which card to use and the threat of losing all those cards is pretty scary. The solution would be to have 2 or 3 good cards with limits 2 times higher than you would ever need. I suggest between $40,000 and $50,000. But, remember to never go over the 45% of that limit so that your debt to credit ratio remains as low as possible, which keeps your credit scores high. (See secret # 17-21)

So, you have a brand new credit card and you are on top of the world. It’s time to go shopping! Well, have fun but remember that every dime you spend, has to be repaid. What is credit for anyway? If you have to pay the credit back, what is the cost of that credit? Hmmm…. Time to calculate costs.

Credit utilization is how much credit you are using against how much credit is available for you to use. Using too much of your available credit and you look like you NEED the credit. If you NEED the credit then you are high risk and your credit scores just dropped. If you don’t need it, then you don’t use a lot of your credit limits, you are low risk and your scores increase.

But credit utilization looks at all of the credit available to you across installment loans and revolving loans, across mortgage loans, student loans even if they are deferred, credit cards, personal loans, auto loans, dentist loans and finance company loans. You are going to get rid of the finance loans, right? Right now, right? Good, you are learning.

Ok, then it would be good to add up all of your credit limits and beginning balances to find out your 10000 credit limit from consumer first and add up all your credit balances on all your accounts. Now, divide your credit balance by your credit limits and you will have a ratio percent. This percent needs to be as low as possible, below 80% at the very least and below 14% to get the best score. Now, go get your loans paid down and remember… those who understand credit, earn it. Those who don’t, pay it.

This is another problem caused by the creditors, not you, but affect what your credit scores will be and you are guilty until proven innocent.

There are some unethical creditors out there that have discovered a flaw in the system that works for them in keeping you as a customer even though you don’t want to. This is where the creditor keeps vital information out of your experian business credit file and forces your credit scores to remain low because that information is vital to calculate your credit score. I’m talking about withholding vital and key information such as credit limit on revolving accounts. Let’s say a creditor doesn’t report your credit limit to the credit bureaus and you have a $10,000 credit limit on a card. You use a thousand dollars and it reports a high balance of $1000 but no credit limit or rather $0 credit limit. You have just now spent $1000 over limit on this credit card. What do you think this does to your credit score until you get this paid off? Yup, you are right, it knocks your credit score a doozy. You just lost a ton of points and this is done on a regular basis for the purpose of keeping customers “stuck” with the creditor, not being able to change creditors with lower rates or even to negotiate a lower rate with the creditor they are with because their credit scores are so lousy.

What to do? Well, again, you are going to have to fight with the creditor to get the credit limit posted to your credit file. This usually never happens and you are stuck with the problem. Or, join a class action lawsuit against the credit card company to get them to report the correct information on your credit files as they should be reported.

There is another strategy that may work depending upon whether you can afford it and have self-control enough to get the job done. It takes running up the balance to just under the credit limit and then paying off the balance or to a very low balance again. The purpose of this is to get the high balance reported as high as possible and then reducing that balance back to very low figures. Since the scoring modules have to have something to calculate with, since it doesn’t have the credit limit to calculate from, it will use the high credit balance to calculate from and you have just outsmarted the credit bureaus scoring modules in keeping your credit scores high. Congratulations.

How many times, when you look over your credit report… hmmm, have you ever looked over your equifax credit report preventing? Well, it’s time to look over your credit report, regularly and learn what it is saying to you so you can be a smart money handler. Ok, we’re talking about Incorrect Balances here, so when looking over your credit reports, look over your account balances. If you find that they are incorrect, there are several things going on here and several ways to correct them. Remember, it is important to have low account balances so your debt to credit ratios can remain low. (Refer to # 17, 18, 19, 20, and 21)

Incorrect balances will increase your debt to credit limit, overall debt to credit limit and cost you points in both cases.

There is a remedy but it takes calling the creditor and haggling over whether they will enter the correct balance or get it removed if it was paid off or pay your bills “on time”. (Refer to # 1) This is where you pay your bills before the reporting date to the credit bureaus. Sound advice, but you have to “do” something before it will get done. Don’t procrastinate, just do it!