Some consumers may be generally paying their bills on time but not seeing their bad credit rise. This can be frustrating, especially since good credit is increasingly important in getting approved for car loans and mortgages.
Drivers with bad credit may be dismayed to know that their shopping habits are dragging their score down. Even if a borrower is diligent about making their payments, they may still get a low score because they’re bumping up against their credit limit.
The current FICO formula factors a borrower’s credit limit into their score. So if, across all of their credit cards, a consumer has an upper limit of $10,000, but is spending $6,000, their score will be negatively impacted – even if they’re paying it all off. This factor accounts for 30 percent of a borrower’s overall score.
The Asbury Park Press recently revealed some ways to combat this. The easiest way is to simply keep credit spending down. Experts say that keeping a ratio of 30 percent, or about $3,000 for every $10,000 available, will keep buyers’ credit score healthy.