How Much Credit Should I Have
- How many credit cards should I have? : personalfinance
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- How much credit should i have for my income
As long as you're using credit responsibly, there's no such thing as having too much available credit. And since credit utilization accounts for a large percentage of your credit score, it's in your best interest to maximize your available credit, as long as you don't let it change your spending habits.
How many credit cards should I have? : personalfinance
What's included in your credit utilization rate calculation? So what's the right amount of credit to use? What is a credit utilization ratio? Your credit utilization rate (or ratio) refers to the relationship between your revolving accounts' available credit limits and the balances you're carrying across all of those accounts. Say you have a credit card with a $1, 000 limit and it had a $500 balance when your account's information was sent to the three major consumer credit bureaus. In this scenario, your credit utilization ratio would be 50% because you're using half of your available credit limit. Keep in mind that paying off your credit card balance in full could still result in a high utilization rate being reported to the three bureaus. That's because credit card companies often report your balance to the credit bureaus around the end of your statement period — not immediately after you make a payment. If you frequently use your cards and want to keep your credit utilization rate low, you may want to pay down your balance before the end of your statement period to reduce the balance that gets reported.
If you simply look at your annual salary before meeting with a broker or a landlord, you could be in for a nasty surprise later on. Also, it's a good idea to make sure you have enough money to pay for moving costs, fees, furniture and any unexpected emergency expenses. How Much Should I Spend on Rent? : The 30% Threshold While everyone's circumstances are unique, many experts say it's best to spend no more than 30% of your monthly gross income on housing-related expenses, including rent and utilities. Under that rule, it's best to make sure that the amount you spend on rent is well below 30% of your household income. In other words, if you're making $3, 000 a month, it's a good idea to pay no more than $900 for rent and other housing costs. Why 30%? That's the percentage that the government has used since 1981 to decide who qualified for public housing programs and initiatives. Households that spend more than 30% of their income on housing costs are said to be cost burdened. Those that spend 50% or more of their pay on housing costs are classified as severely cost-burdened households.
How much credit should i have fun
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If you have multiple credit cards, paying down any of your balances will reduce your total utilization, but you may be able to promote a credit score boost more quickly if you look at the utilization ratios for individual cards as well. Consider the example in the table below, depicting three credit cards with a total utilization of 30%—a total usage level that could already be pulling credit scores significantly lower. Credit Limit Balance Utilization% Credit Card 1 $5, 000 $1, 900 38% Credit Card 2 $6, 500 $1, 800 28% Credit Card 3 $8, 000 $2, 100 26% Total $19, 500 $5, 800 30% After accounting for the minimum payments on all three accounts, let's say you have $300 available to put toward your outstanding card balances. Using it to pay any one of the three card balances, or dividing it across two or all three, would reduce your total utilization to 28%—but putting the full $300 toward Card 1 will do that and lower the utilization on that card from 38% to 32%—a change that will tend to improve your credit score.
How much credit should i have for my income
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As long as you're using credit responsibly, there's no such thing as having too much available credit or too many credit cards. The lower your credit utilization percentage, the better. "High achievers -- those with a score north of 750 -- they're using an average of 7 percent of their available credit, " Sprauve said. Since credit utilization accounts for a large percentage of your credit score, it's in your best interest to maximize your available credit, as long as you don't let it change your spending habits. Credit cards are a tool to help you make the most of your finances. Having a lot of available credit, but not using most of it, could save you a lot of money when it comes time to take out a major loan. 5 Simple Tips to Skyrocket Your Credit Score Over 800! Increasing your credit score above 800 will put you in rare company. So rare that only 1 in 9 Americans can claim they're members of this elite club. But contrary to popular belief, racking up a high credit score is a lot easier than you may have imagined following 5 simple, disciplined strategies.
Your credit card issuer may offer balance alerts, which can be helpful. "In addition to payment reminders, you can set up notifications regarding when your balance has reached a certain threshold, " McClary says. This tool can help you avoid eating up too much of your available credit without realizing it. At the same time, do not apply for more credit than you need. "A lender may come back to you and say, 'We pulled your credit report, and we see all these unused lines of credit, '" adds McClary, who says he used to work in an underwriting role and often saw this. Having too much available credit could raise questions with lenders or scare away others. More From US News & World Report A Guide to Eliminating Credit Card Debt What Are the Advantages of Having a Credit Card? How Credit Cards Affect Your Credit Score
If your utilization percentage is in the low single digits, that may not matter much—and if all your card balances are zero, it won't matter at all. But if your total utilization is closer to 30%, closing the unused card could end up hurting your credit score. If you're eager to get rid of an old card (because it has an annual fee you don't want to pay, for instance), consider getting a new card first. As long as the new card's credit limit equals or exceeds the old card's, it will compensate for the loss of the old card's credit limit. Debt Consolidation Loans and Utilization A strategy for reducing credit utilization rapidly is to use a personal loan to consolidate your credit card debt. Taking out a loan and using it to pay all or most of your outstanding credit card balances (or a large percentage of them) can reduce your utilization ratio to zero. This can save you money, because personal loans typically charge lower interest rates than credit cards. This strategy obviously won't reduce your overall debt, but can still help your credit score improve relatively quickly because installment debt such as personal loans aren't included in utilization calculations.
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