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Hello,
I am unable to understand debt to limit ratio. When there's a balance on my card, that gives a logical calculation. But what if I pay off my balance in full each month? While calculating the ratio do they look at the current balance vs the limit? Do they look at the charges per month, or an average monthly charge amount? Is it just how much you haven't paid off, in that it doesn't impact those that pay in full each month?
Any input is appreciated.
What is debt to limit ratio
Hi Mary,
Debt to limit ratio has only 30% effect on your credit score. If you have less debt and high utilization rate, your debt to limit ratio is considered to be a good one. However, after you pay off on an account, don't close that account as this can hurt your score and the debt to limit ratio.
If you have more credit lines, you may have a low debt to limit ratio. While calculating your credit score, the amount of your debt and the available credit is considered.
Thanks,
Aaron