Credit Card Utilization

Okay so there's a lot of misconception or just wrong information in regards to credit card utilization Duane here with how to build credit TV and in this video I'm going to talk about credit card utilization or credit utilization

My goal is to clear up any kind of misconception or just any kind of information or questions that you may have about credit card utilization But before we get started I have a quick message Once again my name is Duane with how to build credit TV and on this channel we talk about everything you need to know about credit Whether you're looking to establish credit, build credit, rebuild credit or learn more about the FICO score and how it is comprised so you can increase your credit score We also talked about ways to get cash back actual cash money from using credit cards, as well as credit card reviews

So if this sounds like something in which you're interested be sure to subscribe to our channel by clicking the word subscribe below this video to the right and click that notification bell so you don't miss a thing Ok so we're going to talk about four things in regards to credit utilization Number one why is credit utilization so important? Well credit card utilization or credit utilization is really important because it's the second the largest part of our credit score In other words it makes up 30% of our overall credit score or FICO score The other part that's really huge is payment history which makes a 35% of our credit score

So it's important for us to know exactly what credit card utilization is and how to tweak it or work it to our advantage so that we can increase our overall credit score so that's why credit card utilization is so important Once again it's 30% of our overall credit score Number 2 how can you maximize credit card utilization or credit utilization? Well you can maximize credit card utilization by using between 0% and 10% of your overall credit limit Let's say for example you have a credit card with a limit of $1,000, so in order to get between 0 and 10% your balance when your statement closes needs to be between zero dollars and $100 So what I'm saying is you can use your credit card however you want for the remainder of the month or for the entire month but let's say that the credit card closes on the 1st of the month

Let's make it really easier so closes on the 1st of the month what I would do let's say you can charge it up go all the way to 999 dollars and 99 cents as long as you don't get to $1,000 right So what you're gonna do is as soon as the month is about to end or the statement cycle is about to close I would go ahead and pay off that balance and I would pay it all the way down to either zero dollars or between zero dollars and 100 dollars because that is between 0% and 10% Now if I lost you somewhere in there just go ahead and go back and rewind this and watch this portion of the video again it'll make sense to you But when you do that you're actually going to maximize the biggest portion or the second most big portion of our credit score which is 30% of our credit score credit card utilization is 30% of our credit score So what you really need to do to maximize it once again is just keep your credit utilization between 0% and 10%

If you have more than one credit card let's say you have five credit cards and each credit card had $1,000 on it The easiest way to keep up with this is just to make sure that for each credit card once again you're between 0% and 10% Number 3 what does a low credit card utilization rate tells banks or lenders? This part is very important ok because it actually tells the lender or the bank that this person is responsible they know how to manage money more importantly they know how to manage their credit And we all know if you're alive and you live in the us

you need credit for everything You need credit for a car, you even need decent credit to get your electricity turned on, you need decent credit to get a cell phone, you need decent credit to get a house So you need credit credit is very important and the younger you can start building your credit the better off you'll be So once again a low credit card utilization tells the banks and lenders this person is responsible, this person knows how to handle credit and we should probably consider lending this person money so that's why credit card utilization is important in regards to the lenders Number four is there a benefit to having a low credit card utilization rate? Well I'm glad you asked, I'm glad you thought about it

So this part probably has the biggest misconception or biggest wrong information there is out there in regards to credit card utilization A lot of people think that as long as you're between 30% and zero that you're good and really you need to be between 0% and 10% The closer you are to 0% the more that you're going to get out of this category which is 30% that goes towards our overall credit score So let's say my credit utilization is 0% in other words I have all these credit cards but when the statement closes I of all zero dollars That means that I'm going to be getting thirty sent towards my overall FICO score or credit score if I'm between 0% and 10% then you know that's kind of like maybe getting maybe like twenty two percent to thirty percent of the credit card utilization which is once again 30 percent of our credit score

If none of this makes sense to you like I said just go back and watch this portion of the video again it will make sense So having a low credit card utilization rate is very important and it will increase your credit score tremendously I tell you what try this let's say you have a credit card and you're you have $1,000 on that card but your balance currently right now is $500 so you're using 50% of your credit card utilization right So using 50% of your overall credit limit If you pay that balance down and you get it all the way down to between $0 and $100 with which is going to be between 0% and 10% you're gonna be in the excellent category in regards to the overall credit utilization in regards to your credit score

So try this on your own If you don't have a app that you can access like Credit Karma or a nerd wallet or any of the millions of apps millions that's exaggerating but any of the you know at least 5 to 10 apps that they have out there in regards to your credit card definitely download one of those apps so that you can kind of play with this and tweak this and kind of see what I'm saying is true If you lower your credit utilization your credit score will increase I guarantee that that's something that I've done time and time again So credit card utilization is very very important So here's a quick recap

number one why is credit card utilization important? credit card utilization is important because it makes them 30 percent of our overall FICO score or credit score Number 2 how do you maximize credit card utilization? You can maximize your credit card utilization by keeping your credit card utilization between 0% and 10% Number 3 what does low credit card utilization tells banks and lenders? It tells banks and lenders that you're a responsible person and that they probably can trust you to give you a loan or a credit card And number 4 getting your credit card utilization between 0% and 10% will increase your credit score

I guarantee it try for yourself let me know Thanks for watching this video about credit card utilization if you like video please be sure to give us a thumbs up it helps our channel quite a bit and if you want to share this video with somebody that may find it helpful please feel free to do so If you haven't subscribed to the channel consumer subscribe to the channel because on this channel we talk about everything you need to know about credit whether you're looking to establish credit, bills credit, rebuild credit or learn more about the FICO score and how it is comprised so you can increase your credit score we also talk about ways to get cash back actual cash money from using credit cards as well as credit card reviews

if this sounds like something in which you're interested be sure to subscribe to our Channel and click that notification bell so you don't miss a thing Once again my name is Duane with how to build credit TV and I approve this video I'll see you in the next video Until next time take care and be blessed Peace!