How Do Revolving Accounts Affect Your Credit?

When figuring out your FICO credit score, credit bureaus look at more than just your payment history. Your payment history is the most important, making up 35% of your score.

If you miss payments on credit cards or other accounts with revolving credit, it can hurt your score in a big way and for a long time. But if you always pay your bills on time, you will build up a good payment history that will help your score rise over time.

30% of your score is based on how much you owe. If you use the credit you've been given too much, it looks like you don't have enough money to pay your bills, which is a big red flag for lenders. You don't want to use up all of your available credit.

To find out how much credit you're using, divide the total amount of balances you owe by the total amount of credit you've been given.

For example, if your total credit limit is $3,000 and you have a balance of $1,000, your credit utilization ratio is about 33%. The better your score is, the less you use, or how much you use. The best goal is less than 10%.

Even if you pay off your balance every month, your credit utilization can still be high. That's because your balance is often reported to the credit bureaus on the day your statement closes, which is different from the date you might pay it off. Because of this, you should try not to carry a big balance, even if you plan to pay it off in a few weeks.
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