Tag Archives: Credit Ratio

How to Improve Your Credit Rating and Raise Your Scores

Jeremiah James asked:

It’s a well known fact that a good credit rating is an important component of any person’s financial well being. If you have had trouble with your credit in the past and are looking for easy ways to improve your rating quickly and effectively, this article will provide you with some basics and simple ways to improve your score in no time.

If you want to improve your rating, first you’ll need to know the fundamentals of the scoring systems and how they work. There are several determining factors that go into how a reporting agency calculates a person’s credit worthiness. All of these factors combined are used in conjunction with a mathematical formula to generate a score that is indicative of a person’s propensity to pay back debt. In the next few paragraphs we will discuss what some of these factors are, and how you can work to improve them.

Total Debt vs. Available Credit

A large factor in determining your credit score is the total amount of debt you carry in relation to the total amount of credit available to you. Credit reporting agencies look for a total debt to available credit ratio of less than 35%. What this means for you is that you should try to keep your total balances on credit cards and lines of credit at less than 35% of the total credit line. Here’s an example:

If you have a line of credit with ABC Bank of $1000, you would need to keep the balance at $350 or less to stay within the acceptable debt to available credit ratio.

An easy way to improve your rating is to keep your balances on all lines of credit under this 35% threshold. Try to pay for purchases in cash, and only use credit cards when absolutely necessary.


An inquiry occurs any time you apply for new credit. A “hard inquiry” is an inquiry that will show up to other creditors when looking at your credit report. Credit reporting agencies track the number of inquiries into an individual’s credit to gauge the amount of credit shopping a person does. A large amount of inquiries over a short period of time usually demonstrates a lack of financial stability. You can avoid adversely affecting your score with excess inquiries by not applying for credit unless it is absolutely necessary. As a general rule, inquiries to your credit only stay on your report for about six months.

Although controlling these factors may seem simple, sometimes special circumstances can work against a person’s best efforts to improve their credit rating. An emergency need for money can obviously affect a person’s ability to keep their total credit balances under 35%. However, if you take proactive steps every day to work toward staying within these limitations, even these special circumstances won’t prevent you from improving your credit rating. Remember, these changes won’t take place overnight. But by attacking these problems at their source you will vastly improve your credit rating over time.


Is it worth is for me to get another credit card to get a discount on product? Then canceling it?

Hal Mark asked:

So, in a nutshell. Having a good credit rating is very important to me. The quandary im in is that i want to get a ps3. And if you sign up for a Sony CC you get a $150 credit. So, that would seem like a good deal to me on a ps3. But i don’t want to add a bad credit to dept ratio to my credit profile and i think i read that canceling a CC too quickly is bad. But im not sure if that really matters if Ive had, and still have, a couple other ones that are years and years old. My credit score right now is 770 or something. What i would do in this case was to sign up for the card. Charge the ps3 to it. Pay it off, in full, the first billing cycle. Then cancel the card whenever i reached the card stipulations to qualify for that $150 rebate/credit (if there is any stipulation, not sure). But if increasing my dept/credit ratio or canceling a card quickly is going to hurt my credit rating. its not worth it to me. What do you think I should do? ok, so, what if i dont cancel the card and just put it away for a year like the second responder said? Would that effect my credit/debit/open accounts… in a bad away? Answering som questions from one of the posters… I think i only opened one account this year it was a ‘store’ CC not a major CC. “Do you have depth of credit, meaning, how many accounts have you had open in the last 10 years.” CC accounts? Maybe 10? But the current status on my CC profile says: Accounts: 15+ Open Accounts: 5 And i own a house if that helps any. Ok, thanks to everyone who took the time answer. Think im going to go ahead and get the card. Thanks! Ok, thanks to everyone who took the time answer. Think im going to go ahead and get the card. Thanks!