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debt defense attorney in West Palm Beach

The Truth About Credit

You constantly hear about how important your credit score is, so it’s only natural that credit scores are a source of stress for many people. However, that doesn’t have to be the case. When it comes to your credit score, the more informed you are, the better. Here are some important points to understand about credit.

The Credit Utilization Ratio

Aside, of course, from paying bills in a timely manner, actually utilizing credit is the most important thing you can do to maintain a healthy credit score. Some people think their best option is to avoid credit altogether in an effort to keep themselves from abusing it, but in fact the opposite is true. That said, the key is to be careful about the way that you utilize credit.

When utilizing credit, it’s best to do so by following the credit utilization ratio. Thirty percent of your credit score depends on how you utilize credit. Best practice is to keep your credit utilization under 10%. At the very least, borrowers should utilize less than 30% of the credit available to them. To provide an example, if you have a card with a $10,000 credit limit, at no point should you owe more than $3,000 on that card. You always need to carefully consider the types of purchases you’re charging to your card. Even if you consistently pay your balance off quickly, you’re still straying from the ratio if your balance gets too high, thus harming your credit score. The whole point of the ratio is to demonstrate that you can have credit at your disposal, but you are using it responsibly.

The More You Spend, the More You Need

Be mindful when selecting a credit card. If you have a card that you use frequently to gain points or whatever your reason is, you need to make sure you have more credit available that is not being used. Ideally, you’ll want to avoid spending large amounts on any of your credit cards, but that’s not always an option for some people. The more credit you have available to you, the better your spending habits will reflect on your credit score.

Don’t Close Those Cards

If you’re overspending, closing your credit cards is not recommended. Down the line this might be a good tactic, but doing so would be ill-advised before cutting down on the card’s spending and monthly balance first. It is also important to wait until you have a record of timely payments on the card before closing it.

These strategies are great, but they might not be able to help your credit score if you’re already far into debt. If abusing credit has lead you to struggle with debt, you should seek out a debt defense attorney in West Palm Beach to learn your rights. Give Kelley & Fulton a call today to start down the path of financial stability.