Ace Your Credit Utilization
To improve the amounts owed portion of your FICO score, start by finding out how much credit you have available. Then, pay down balances. If you're a good customer, the banks may also grant requests to increase your revolving credit lines. An old rule of thumb used to say keep your credit utilization below 30 percent, but that's a myth. There's no magic about 30 percent. Your score won't plummet at 31 percent or soar at 29 percent. The real rule? The lower the utilization, the better but something is better than zero.
That can be especially tough for borrowers who only have one account. If you've got one credit card with $ 1,000 line, its not that hard to hit 30 percent, since you'd only need to carry a balance of $300.
But if you max out a credit card account by using up an entire line of credit, expect your FICO score to drop by 50 to 80 points.
Another danger comes from joint account holders or authorized users who put excessive charges on your shard card. If the other cardholder maxes out a shared account, your FICO score will fall.
Another recommendation is considers making payments to creditors more than once each month. Otherwise if you put a major expense like a new appliance on a credit card, even if you plan to pay it off, your FICO score may take a hit. The reason is that credit scores are calculated as a snapshot in time, so if that happens to be right after you charged a new $1000 washing machine, your utilization ratio will look worryingly high.