30% of the total FICO credit score is based on Available Credit, or the amount of credit available on open accounts. FICO credit scoring models rate credit scores higher if revolving accounts have balances less than 30% of the high credit limits.
The utilization factor that affects the credit score does apply to most accounts credit cards, car loans, mortgages, and other accounts including installment loans. This is why your credit scores will go down when a new mortgage or car loan reports on the credit report.
And as those accounts are paid lower each month the scores steadily increase.
For this reason it’s important to remind consumers that a fast and easy way to increase their credit score is for them to pay down the balances on their credit card accounts so the balances are lower than 30% of the limits. Or they can call creditors to ask for a credit increase which can also improve their utilization and scores.
30% is a magic number when it comes to credit scoring.
30% of the entire score is based on available credit, so insure you have real usable credit on your reports and that you keep your balances below 30% of your limits.
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