Rex Johnson, founder of credit union consulting firm Lending Solutions Consulting, has spent years studying FICO credit scores – the most widely used among lenders. Scores range from 300 to 850 – the higher the better, with anything above 760 being the most desirable.
Johnson estimates that you lose 1 point for every percent of your credit limit that you use. So if you have a total credit limit of $10,000 and have an outstanding balance of $4,000 (40%), your score would be 40 points lower than if you had a $0 balance.
Ideally, credit experts say, your never want your balance to exceed 30 percent of your credit limit.
It’s always good to pay off your balances every month. But creditors may take a few weeks or even a couple of months to report your payment to the credit bureaus.
To boost your score: Don’t charge anything for at least 60 days before applying for a loan, Johnson said. That way it’s likely that all the payments you’ve made to date will be reflected in your credit score by the time a lender requests it.
If you can’t pay off your total balance in full, at least keep it under 30 percent of your total credit limit.
