Use Less Available Credit for Better Credit Score

As you all know, the FICO score, which is the credit score that every major creditor, from banks to credit cards look at when they are trying to determine whether you are a worthy risk of their credit or not, is extremely important in your financial world. Why? Because the better your credit, the better and more efficient your buying power is.

You can buy investments, like your home, for a much lower overall cost for instance. And this has a domino effect, because then you get more of an ROI (Return on Investment) on your home when you sell it, since over all you paid a lot less than others with less outstanding credit would have.

In the end, you might make out like a bandit in other words, if you got a killer deal on your mortgage interest rate, and can also sell your home at a profit over what you bought it for. This is especially true for those that stay in their home for a few decades. The longer you stay, the more your investment is typically worth.

One of the biggest rules of thumb to make your credit rating more appealing to potential suitors when it comes to shopping you for a loan to buy something of value, such as a car, home, major purchase, or credit card even, is to make sure you are not over using your available credit. This means that if you have ten credit cards open with 5,000 dollar limits each, you should not be using 50,000 dollars of that credit. Instead, you should be keeping a comfortable ratio.

The less of your available credit you’re using, the more likely these creditors think that you will pay them back at a reasonable time and on time, and that they will even get the return on their investment at all, since you don’t have as many outstanding debts to other creditors and bills.

So, if you’ve been fortunate enough to build up so much credit that you have a ton of dollars in unspent limits, don’t go hog wild and charge it all up. This can really ding your credit, and make you less appealing for great deals on loans and credit cards. It could really increase the interest rates you pay, and you may not even get as many offers in the first place. If you have a lot of unspent credit on the other hand, creditors may be fighting over your business!