Dear Liz: I recently applied to refinance my mortgage. The lender sent me a copy of my credit reports and scores. My FICO scores from all three credit reporting agencies were OK, just a little under 800, but under the heading “Key Factors affecting credit score” was the following statement: “Proportion of balance to credit limits too high on revolving accounts.” I have only one credit card, which I’ve had more than 20 years. (Several department store credit cards were closed, with no balance, many years ago.) I never exceed 10% of my limit, and on the date the report was issued, my balance was 7%. You frequently advise borrowers to limit credit card charges to a small fraction of their limit to help their score. How can 7% be considered too high? Is it possible there is an error somewhere and I should investigate?
Answer: If your FICO scores are close to 800, they’re more than OK — they’re excellent. And once scores are that high, the reasons the credit bureaus give you for why they’re not higher are pretty much irrelevant. Even if you could fix the purported problem, it probably wouldn’t affect your numbers that much.
But you should consider adding another credit card once your refinance closes. A second card could serve as a backup if your primary card ever gets temporarily shut because of fraud. A second card also gives you somewhere to go if your issuer raises your rate, cuts your credit limit or starts imposing unreasonable fees. It’s not smart in today’s financial environment to be beholden to a single credit card issuer.