The way you use your credit cards helps you manage your monthly budget and also assists you in financial planning for the rest of the year. The moment you get a new credit card for bad credit, it is almost impossible to stop yourself from making an extravagant purchase right away. But remember, you could be increasing your credit utilization ratio by giving in to that moment of weakness.

Experts are of the opinion that you should always maintain a low credit utilization ratio. To that you will only have one question. What good is a credit card if you cannot use it the way you want to?

Of course, you want a credit card that you can use without giving a second thought. But the habit to maintain a low credit utilization ratio is always going to work in your favor. It is going to help you stay out of credit card debt and you won't have to struggle at the end of every month to make ends meet and also to pay the monthly credit card bill.

Make a credit card comparison and you will understand how this financial instrument offers you the liberty to make big purchases and uplift your life style. But in the wake of these purchase decisions, you tend to over spend. This is why several banks in Mesa, Arizona advise credit card owners to first practice thrifty spending habits and then pick a financial instrument that suits their lifestyle the best.


Maintaining A Low Credit Card Utilization Ratio On All Your Accounts - Certain Rules To Follow

• Do not abandon any of your credit cards in order to maintain 0% utilization ratio
• Maintain a healthy utilization ratio of less than 30%
• Consider an upper limit to your credit utilization ratio which can be 40 to 45%
• Remember to pay your credit card bill on time at the end of every month


Can Opening A New Credit Card Account Affect Your Credit Score In A Positive Way?

•If you already have one credit card account with a $1,000 limit, you can add another credit card with the same amount of limit to your portfolio.

•Given that your expenses on your first card were $900, adding another credit card with a $1,000 limit is going to convert this 90% utilization ratio to 45%. This is because now you have two credit cards with $1,000 spending limit each.

•The moment the new credit card with $1,000 limit is added to your credit reports, your utilization ratio which was earlier 90% is going to reduce to 45%. This is going to look much better to the leading credit scoring models.


Understanding New Credit-How Does This Little 10% Of Your FICO Score Affect Your Credit Worthiness?

You Want To Know What A Risky Financial Behavior Is?
If you have been warned by anyone against opening new accounts in a short span of time, they were probably guiding you in the right direction.

If you open many new accounts in a short period of time, it is going to draw attention to your purchase and money habits. It will appear as if you are in need of money and are acting recklessly. The leading credit scoring models are going to factor in the number of hard enquiries that went into your credit reports and the number of accounts that you have opened in the last 6 months. Even the length of time between the opening of two credit card accounts is going to be factored in. Remember, every new enquiry and each new account that you open is not going to have a negative impact on your score automatically. However, there is always a possibility of increased risk getting attached to you and that will result in a small negative effect on your credit scores.

Lucky for you, this category only amounts to 10% of your total FICO score.

•Remember not to open up too many accounts to reduce the impact of this factor on your overall credit score
•You can wait for a few months or until your last account can be considered as "old" by the leading scoring models
•If you have had any hard enquiries in the past, make sure that it has been over one year at least before you open another account

Length Of Your Credit History-How Does This Factor Matter In Your FICO Score?

Whenever you are in the middle of a credit card comparison, you will be tempted to open a new credit card account as soon as you reach the end of the list. But remember, if you already have some old credit cards, opening a new account is going to reduce the average age of your accounts. This is going to have a little negative effect on your credit score.

Length of your credit history forms 15% of your FICO score and it will be factored in by the leading credit scoring models. Remember its following important aspects that will be factored in to determine your credit score:

•The older your credit history is the better it is for you
•If you have established a few accounts a long time ago, it is important to consistently manage them and do not carry any balance on them
•Cultivate a habit of paying off your credit card balances at the end of every month to convince lenders that you are a less risky borrower as compared to any other credit card user
•Keep all your accounts open and do not close any of them unless you absolutely have to as the average length of time they have remained open is going to determine the length of your credit history
•By having all your accounts opened you will appear to have a longer credit history and that will demonstrate to the lenders that you are a less risky borrower
•Do remember that the ages of your oldest and newest credit card accounts will also be factored in when determining your overall credit score

At the end of the day, no matter what financial instrument you are using and regardless of the credit card benefits comparison that you have made over a period of time, it all boils down to cultivating intelligent spending habits. If you are not using your credit card wisely, you better start doing that now.

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