2013년 11월 30일 토요일

About 'is debt ratio a percentage'|The debt-to-equity ratio as a fishing lure







About 'is debt ratio a percentage'|The debt-to-equity ratio as a fishing lure








When               my               husband               and               I               refinanced               our               home               loans               early               this               year,               we               were               told               several               times               how               our               "credit               utilization               ratio"               was               on               the               high               side.

This               came               as               a               surprise               since               I               consider               myself               to               be               rather               shrewd               when               it               comes               to               money               matters.

Credit               utilization               ratio               is               bank-speak               for               describing               the               ratio               of               what               is               owed               on               a               credit               card               compared               to               your               available               credit               line.

This               ratio               is               so               important               that               it               actually               accounts               for               about               30%               of               a               credit               score.

In               our               situation,               our               credit               utilization               ratio               was               high               because               instead               of               spreading               our               debt               evenly               over               several               cards,               I               put               everything               on               the               card               with               the               lowest               interest               rate.

While               this               makes               sense               in               terms               of               saving               on               interest,               it               also               throws               off               the               ratio               which               impacts               a               credit               score.
               Calculating               the               Credit               Utilization               Ratio
               Calculating               the               ratio               is               super               simple.

All               that's               required               is               a               calculator               and               a               copy               of               your               current               credit               card               statement.
               1.

Divide               the               current               credit               card               balance               by               your               limit,               also               known               as               the               "credit               line"               .
               For               example,               if               you               have               a               $10,000               limit               and               have               $4800               charged               on               the               card,               divide               4800               by               10,000               to               come               up               with               .48.
               2.

Multiple               this               number               by               100               to               convert               the               fraction               into               a               percentage.
               Using               this               example               .48               becomes               48%.

Your               credit               utilization               ratio               on               this               particular               credit               card               is               then               48%.

This               exercise               should               be               repeated               on               all               your               credit               cards.
               What               is               a               good               range
               The               FICO               score               looks               at               the               credit               utilization               ratio               in               two               different               ways.

They               will               calculate               the               ratio               ~               like               you               just               did               ~               on               each               card               to               determine               an               overall               score.

Next,               they'll               add               up               all               your               credit               card               balances               and               divide               this               number               by               the               total               credit               line               for               another               score.

If               either               of               these               numbers               is               too               high,               then               your               credit               score               is               impacted               negatively.
               When               it               comes               to               a               good               range               for               a               credit               utilization               ratio,               I've               seen               answers               anywhere               from               25%               to               75%               (read               creditscoring.com               to               view               what               experts               are               saying.)               According               to               my               personal               banker               at               Key               Bank,               the               ideal               credit               utilization               ratio               in               today's               economy               is               between               30-40%.
               More               by               this               author:               
               How               Credit               Card               Management               can               Impact               a               Home               refinance.


               How               to               Get               a               Lower               Interest               Rate               on               a               Credit               Card






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