7 Ways to Wreck Your Credit – Running Up High BalancesPosted on October 13, 2009
Creditors and lenders want to see people use just the right amount of credit. Using too little sends up red flags and using too much sends up flares and fireworks!
The credit scoring model favors lots of credit that is not utilized too little or too much. Having many low balances on several cards rather than one large balance is preferable. Even cardholders who run up high balances and then pay them off each month, can be unknowingly damaging their credit. The FICO score does not take those payments into account, it just sees the large balances.
Thirty percent of your credit score looks at the amount of money borrowers owe and then compares that with the amount of credit they have available. This is called your credit to debt ratio. This number can get unpleasantly skewed if you owe more than 30% of what is available to you, especially if one card is near its limit.