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Keeping your credit score high with credit utilization rates

USA Today explains that even Americans who have good credit aren't necessarily doing well with debt. An average household, as of 2017, had $5,700 in outstanding credit- card debt.

Debt affects everyone and almost every aspect of your life. While you have good credit, it's wise to start thinking about how to eliminate that debt, so you don't have to worry about it in the future. Having debt doesn't have to be bad, but it does mean that you have one more bill to pay if you lose a job or find yourself in tight financial circumstances.

People who have good credit scores do often carry larger amounts of debt, too. When credit scores are calculated, one of the things lenders look at is your debt-to-income ratio as well as the amount of debt you have versus the amount of credit available to you. If you have $14,000 in available credit and carry $5,700 in debt, it looks better than having $5,000 of credit and $4,700 of debt. Why? It could show restraint, that you're careful with spending or just generally make you look like a safer bet for lenders.

Keeping your credit usage ratio under 30 percent does help guarantee a better rating, but having open credit puts you at risk of overspending, too. To address this, consider eliminating one or more of your credit cards along with some of your debt. Paying off just one card and closing that account shouldn't alter the ratio much and helps you fall into a better financial situation.

If you struggle to pay down debt, don't keep charging. Keep in mind that there are other ways to reduce your debts over time and all at once. Whether it's bankruptcy or a consolidation plan, your attorney can help you decide on the best path forward.

Source: Nov. 30, -0001

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