1. Avoid the high ratios.
2. Avoid the risky loan.
Avoid a high-risk loan; it will keep your scores excruciatingly low while creating a yo-yo affect in a low score bracket. It will not help get your scores where they need to be in order to achieve low interest rates and save tons of money.
If you absolutely need to have a higher balance on a credit card, then get the credit limit raised before you need it.
You know why; just do it.
Let’s repeat this again and again…
Avoid risky loans and keep balances low!
Avoid risky loans and keep balances low!
Avoid risky loans and keep balances low!
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If you think nobody cares if you’re alive, try missing a couple of car payments.
-Earl Wilson-
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Nothing so cements and holds together all the parts of society as faith or credit, which can never be kept up unless men are under some force or necessity of honestly paying what they owe to one another.
Valuable Lenders are those lenders that are reputable nationwide. We see lots of advertising from some not so valuable lenders. They are not so valuable because they don’t show all the information needed on a credit report that will allow our scores to be the highest possible. For instance, if your account shows the “high balance” but not the credit limit, as soon as you use that card you have a debt to credit ratio of 100%. This can lower your score dramatically. This is an example used by many, not so reputable lenders such as major credit card companies.
Valuable Lenders are those lenders that are ethical in their practices and are national or international banks and financial institutions.
A high debt to credit limit ratio is not a good thing to do on a new loan because it will impact your business credit scores many different ways. By now you should be able to guess at most of them and understand why but let’s go over them just to be sure.
You have an inquiry, at least one and perhaps more and depending on how many and what your credit score is at the time will determine how much it affects your credit scores.
1) You have a new loan.
2) You have no history on this new loan.
3) It has a high balance.
4) It has a high debt to credit limit ratio. These reasons alone can cause your credit scores to drop significantly that you should be concerned about doing so.
The solution is to get a high enough credit limit on revolving accounts that you won’t need to use more than 45% of available credit on your account. If it is an installment loan, then the impact will be less felt but still have a significant impact on your credit scores. The solution here would be to pay down the loan to less than 80% debt to credit limit as soon as possible. I have one friend who will borrow more than is needed on his loan so that when the loan closes, he pays down the loan 20% to have his debt to credit limit at 80% as soon as possible. This will minimize the impact on his credit scores and keep his scores higher than someone who doesn’t do this. For those who need to keep their credit scores as high as possible for business reasons or for investing, this is a great strategy to use. It takes some money management and if your credit scores are high to begin with, then you stand a great chance of being able to qualify for the higher credit limit to use this plan. To your success…
High debt ratios are just that… high! Get them paid down as quickly as possible and see your scores jump up. Get revolving accounts below 45% and installment accounts below 80% is the best to start with. Of coarse, getting them below 14% would be ideal. But remember that getting installment loans below 80% and then keeping them for as long as possible will be best for your credit scores but paying the loan off as fast as possible will be best for reducing your interest fees. But we are talking about increasing your credit scores here, not what is best for your pocket book. Well, ok, it works well for your pocket book too, because you will get the best interest rates available and that will reduce your interest and be great for your pocket book.
