Finally, one of the more common reasons why an individual’s credit score begins to ount of revolving debt, typically in the form of credit cards. Credit agencies place heavy emphasis on what is commonly referred to as an individual’s debt-to-credit ratio, also referred to as their credit utilization ratio. This data point provides a brief overview of how much available credit an individual has used and how much they have remaining.
Much like multiple applications for new credit lines may signal that an individual is experiencing financial hardship, an inordinate amount of credit usage will typically indicate a similar situation. When assessing your credit utilization ratio, you simply divide the amount of credit card debt you currently have by your total credit allowance. For example, if your credit line is $20,000 and you currently have used $8,000 of this, your credit utilization ratio would be 0, or 0.4. As a broad rule, credit agencies will tend to view credit utilization ratios above 0.5 with some degree of concern.
Housing Assistance for Bad Credit
In situations where you would like to apply for a home loan but have a poor credit history, you may discover that the initial terms offered to you by a standard mortgage lender are not in your favor.