Mortgage FAQ: Does Having a High Credit Card Balance Affect My Credit Score?
Updated: Sep 15, 2020
"EVEN THOUGH I PAY OFF 100% OF MY CREDIT CARD DEBT EACH MONTH, I DO USE MY CREDIT CARDS A LOT AND HAVE PRETTY HIGH BALANCES. WILL HAVING A HIGH BALANCE AFFECT MY CREDIT SCORE?"
Since credit utilization—which is the amount of credit you use in comparison to your credit limits—makes up 30% of your FICO credit score, having high balances on your credit cards can lower your credit score. As a good rule, it’s best to keep your balance at or below 30 percent of your credit limit. However, it’s important to note that any drop in your credit score due to a high credit utilization ratio is likely to be temporary.
Each month, your card issuer reports your balances to the major credit bureaus and this data replaces data from the previous month, which may result in your score fluctuating. In other words, any change in your credit utilization due to a high (or low) balance will depend on how much you’ve used that credit card when your card issuer reports the data.
If you find that you’re maxing out your credit cards regularly, you may want to consider calling your card issuer and requesting a credit line increase. In the end, keep in mind that the most important thing for you to do is to pay your credit cards on time. Having late payments can be much more crippling to your credit score than having high balances on your credit cards.
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