• Skip to main content
  • Skip to primary sidebar

Ask Liz Weston

Get smart with your money

  • About
  • Liz’s Books
  • Speaking
  • Disclosure
  • Contact

debt to credit ratio

Q&A: Why you should keep credit use low

November 26, 2018 By Liz Weston

Dear Liz: You recently said you don’t need debt to have good credit, but I was told that “credit utilization” — the amount of credit you use compared with your credit limits — is important. Paying off the cards each month means zero balances are reported to the credit bureaus and result in no utilization. Also, older credit accounts help scores, and my older accounts dropped off after a period of time, lowering my average age of credit accounts to four years. How can I fix this? Good credit doesn’t stay on forever.

Answer: It’s not true that paying off your cards results in zero credit utilization. The balance that the card issuers report to the credit bureaus is typically the balance on your statement date. You could pay it off in full the very next day, and the statement date balance would still show up on your credit reports and get calculated into your credit scores.

That’s why it’s important to keep your credit utilization down, even if you pay in full (as you should). It’s good to keep charges below about 30% of your credit limit. Below 20% is even better, and below 10% is best.

Accounts typically won’t drop off your credit reports unless they’re closed. Even then, the closed accounts can remain on your credit reports for many years, contributing to the average age of your accounts. The key to having good scores is to keep a few accounts open and in use, not to carry debt.

Filed Under: Credit Cards, Credit Scoring, Q&A Tagged With: credit card debt, Credit Score, debt to credit ratio, q&a

Friday’s need-to-know money news

January 9, 2015 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: Bouncing back from a holiday debt hangover. Also in the news: How to boost your credit score, which financial documents you need to keep, and five free financial apps.

How to Bounce Back From the Holiday Debt Hangover
Time to pick the tinsel out of your wallet.

The Best Way to Boost Your Credit Score in 2015
Increasing your credit limit will decrease your debt ratio.

Cleaning Your Financial House: 4 Items to Keep and 4 to Shred
What you should keep and what you should destroy.

Five Great Financial Apps That Are Free
Help right at your fingertips.

The Best Energy Efficiency Upgrades for Your Money
Spending that will pay off in the long run.

Filed Under: Liz's Blog Tagged With: apps, Credit Cards, debt, debt to credit ratio, energy savings, financial documents

Primary Sidebar

Search

Copyright © 2025 · Ask Liz Weston 2.0 On Genesis Framework · WordPress · Log in