January 25, 2014/POSTED BY /0 Comments

Credit cards are best enjoyed by the disciplined, who can remain cognizant of their ability to pay the monthly bill, or at least pay it before their account becomes overdrawn. So you’ll want to check your credit scores regularly, which means keeping a close eye on your credit utilization ratio, click here for info.

How much should I expect to pay in interest?

When you borrow money, there’s a good chance it will cost you a lot more than you originally paid. This isn’t just because of what you pay for the loan, but also how much you pay interest on it over its lifetime. The good news is that your interest rate will probably go down over time, as your credit score and other credit-related factors improve. However, your credit utilization ratio may go up over time as your debt grows. How can I improve my credit utilization ratio? It’s always good to keep a close eye on your credit score, but it’s even more crucial to understand how much you’re using your available credit and pay your credit card balances in a timely fashion. With that in mind, here are three simple ways to improve your utilization ratio: Reduce your credit utilization ratio: Reduce your credit utilization ratio by making sure that you pay off the outstanding balance in full each month. Some people like to keep their credit utilization ratio around 15% because they like to pay their balance off as fast as possible. If your credit utilization ratio is currently high, you should try to pay it off in full each month.

Keep your debt-to-income ratio: Make sure you don’t pay your credit cards too much. Don’t let them consume your income; that way, you don’t have too many costs to account for when they come due. You may be tempted to pay more to make them work harder. Try to pay them less than 20% of your total income and then try to repay those balances at a rate of 15% or less. Keep your credit card balance to a minimum: This is really an important factor because you can quickly exhaust your credit limit when you rack up too many charges. But, you also don’t want to be overdrawn in your debt-to-income ratio. It can go negative quickly if you pay it all in one go. When you can’t keep up with your payments, pay them off quickly.

Take care of your credit score. Keep up with all the necessary information on your credit report each month. This includes your accounts balances and your balances on other cards you have that don’t require a balance to open.

Buy good credit cards. When you can’t maintain good credit, it won’t be easy for you to get a job. In the early years, you should have a savings account or money market account with your own money to help pay off some of your debts.

The Bottom Line

Keep in mind that credit scores and rankings are also affected by whether or not you have other factors, such as good credit history, a good employment history, a high income and an extended credit history.



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