Reducing the Balance on Your Credit Card Can Result in an Increase in Your Credit Score

Keeping the credit card balance low has many benefits as far as you credit score is concerned.  To credit scoring models credit card balance determines whether you have a control on your debt situation or not.  Having a low balance tells them that you are in better control of your debt.

Having a low balance on your credit card means smaller payments to be made every month.  This means that you are less likely to miss the payment or not be able to pay due to financial trouble.  The credit scoring models consider a factor that is commonly known as debt to limit ratio.  The debt to limit ratio is the amount of money that you have available to you on credit and the amount that you actually utilize.

Having a low balance on your credit card increases the debt to limit ratio and hence affects your credit score positively as it is an indicator of a better creditworthiness .  Having lower balances on your credit card means that you are more likely to be able to manage your to pay your debt in full every month rather than make the mandatory minimum payments.  Paying off the credit card bill in full every month means that you avoid the high interest rates and other financial charges.

Keeping the balance is low on credit cards is not the only factor that affects your credit score.  Try and get good credit advice and sound knowledge about how shall manage your finances better and live within a budget.  Using credit responsibly and paying off your debts in time will serve to improve your credit history in time and make you a much happier and a financially secure individuals.