Understanding Your Credit-Utilization Ratio

Posted by Bonnie Martin Designated Broker on Tuesday, June 4th, 2013 at 9:32am.


realtor.com - You already know that your credit score is important when you’re buying a home. Your credit score isn’t just about how much credit you have and whether or not you pay your bills; it’s also about how you use the credit you have. Your credit-utilization ratio reflects how much of your available credit you regularly take advantage of.

Credit is a convenience, not a cash substitute, and that convenience has a cost. If you are using credit to meet your financial wants and needs on a regular basis, you may be on a dangerous path. If you find yourself having to use credit cards to meet your basic necessities of food, shelter and transportation, then stop and take a closer look at how you are conducting your life. Chances are if you don’t have enough money in your budget to cover the basic necessities this month, you won’t have it next month either. Nor will you have the money to pay your credit card bill when it arrives.

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