How to Boost Your Credit in 15 Seconds

One of the most important credit score factors is your credit card debt-to-credit limit ratio (aka debt utilization ratio). Keeping your credit card balances below 10% of your credit limit can do wonders for your credit score. Inversely, having higher balances can really hurt your credit scores.

Here's a few key points to consider about debt utilization (watch out, it's about to get geeky):

• The ratio of total credit card debts to total credit limits is most crucial for your score. For example, if you used $4,500 in debt across 4 cards and had a total credit limit of $15,000, you would have a 30% debt-to-limit ratio.
• Keeping this ratio low, ideally below 10%, will help earn you the most credit score value in this category.
• Your credit card debts are calculated from the "statement balance." So you could be receiving credit debt damage even if you pay your credit card bill in full each month.

There are three ways you can improve in this category:

1. If you are carrying large debts, pay them off. A $5,000 credit card debt from your vacation in April could be bringing down your credit score today. Paying off credit card debts is good for your credit score and your budget.
2. Control your credit card spending. Try to never charge more than 10% of your credit limit on your credit cards. For a $10,000 limit, this is $1,000. If you do charge over this line, you might want to pay it down before your credit card goes to "statement."
3. Increase your credit limits. This is where the "15 seconds" comes in. I  went online today to increase a credit limit I have with American Express card. The online form only asked for my requested increase amount and my monthly income. One quick click, and I had nearly doubled my credit limit for that card. My good customer record made this process a snap. Not all requests are this easy though, check to make sure the credit card issuer will not pull your credit with a hard inquiry before you request a credit limit increase.
4. Bonus tip - Avoid closing unused credit cards.  The unused credit limit acts as "insurance" and will help to keep your overall debt utilization lower than if you closed the account.

By increasing your credit limit, you make it harder to go over that 10% threshold and damage your credit score. Once my new higher credit limit is reported to the credit bureaus (within a few weeks), my score could show a big increase from the debt-to-limit drop.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit scores, loans and personal finance as the CreditBloggers.com moderator.

Comments

[Jim]

I guess I'm not so worried about my credit score anymore because I really don't want to dependent on something for money. For the past few years I have played around with the credit card companies, trying the tactics of raising the credit limit to lower debt to credit ratios even though the balances stay right about where they were before. I have a lot of accounts open but only a few are used, so my utilization is low. For now I am more focused on just paying off the balances on everything on my report one at a time. When you have no debt and don't need to make payments to anyone, what you have left is money. I think I would rather have $850 cash in my hand and not owe it to anyone than an 850 score.

[Kevin]

Keeping your ratios low by increasing your limit is a great idea and one I hadn't thought of. Thanks for the great advice.