How to raise your credit score: Mind your Credit Utilization Ratio

With so many economic worries abounding, consumers should make tending to their financial health their number one New Year’s resolution. By being committed to maintaining low balances on your credit cards, as well as paying down high credit card debt in general, you can decrease your credit utilization ratio significantly and raise your credit score in the process.

The revised FICO credit scoring system for 2009 are weighted heavily on the amount of available credit you have versus what you are actually using – this is the ultimate definition of credit utilization ratio. Experts advise to tap only between 10% and  30% of your available credit. Maintaining your balances will help you improve your credit score.

The best way to achieve a better credit utilization ratio isn’t through a confusing series of payments, or as some websites advice –  a “round robin” payment schedule. Simply charge less and pay off your existing credit card debt in a timely and structured manner.  By following a healthy budget strategy – paying your bills on time and living within your means – you should be able to see improvements on your credit score.

Just the difference in credit scores is the number one reason why your neighbor may get a great 5.25% rate on a conventional 30-year fixed mortgage while you get stuck paying over 7% over the lifetime of your loan. By sticking to your financial resolution, you too can earn the right to the best credit rates available.

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