Everyone wants better credit. Those with a higher credit score receive better rates on car loans, home loans, credit cards and even car insurance. A top credit score makes life easier. But you may find yourself wondering how you can achieve raising your credit score to receive any or all the benefits previously mentioned. The most common answer to this question is to pay off your credit card debt. Unfortunately, this solution is not as easy for most people to do but it is the most significant way to raise your credit score.

 Credit debt is a key factor in determining your credit score, the less debt you owe, the better the score. This is all a part of the “Debt Ratio” which is one component of a credit score. Debt Ratio is how much debt you owe vs. how much credit you have available. An example of this would be if you have one credit card with a maximum limit of $2,000 and your balance on said card is $1,000; this would make your Debt Ratio 50% (1000/2000). If you were to pay down the balance to $500, then your Debt Ratio is 25% (500/2000). The LOWER your Debt Ratio, the better your score.

 Short of paying off all of your debt, what other way can one lower their debt ratio? By increasing your already existing “available” credit. Two ways to increase your available credit is to either request a higher limit with your current credit card company or to acquire an additional credit card. Whichever you choose the result will be an instantly lowered Debt Ratio, which will raise your credit score. Be mindful however to not use the new card or increase your spending! Also keep in mind that too much available credit can drop your score. If you have many credit cards with high balances or are simply maxed out, this solution may not work for your specific situation.

 Credit scores are based on a myriad of different items, Debt Ratio being one. This is one of the easier components to understand and work to your advantage to help raise your credit score. Sensible spending and credit management is always the best way to ensure an above average score.

 --Want to learn more ways to help your credit score? Look for the next blog from Andy Digerness of The Glander Group and be sure to contact us for all your Real Estate needs.