Credit works in mysterious, sometimes contradictory ways.
It doesnt always work out that way, thoughand sometimes smart financial moves arent the best credit moves.
And youre right to think of them as riskythey can be.
Whats more,bill providers are legally allowed to charge morefor customers with risky credit.
If you dont have credit at all, they might consider you a risk.
The trick is to build credit responsibly.
Thats a healthy responseyou dont want to tempt yourself and use credit unnecessarily, after all.
The lower this ratio, the higher your score.
Of course, it’s possible for you to keep this ratio low by using very little debt.
Another way to increase it, however, is with a higher limit.
In fact, heres a breakdown of how your ratio affects your credit score, according toCredit Karma.
Note that your score at 1% utilization is better than not using any credit at all.
This can ding your score for six months or so, but at least its temporary.
The next step would be to cancel them, right?
Not necessarily, as it could lower your credit score.
Thats because 15% of your score depends on the length of your credit history.
Your credit utilization makes up 30% of your score.
By closing an account you lower your available credit, which means your utilization ratio increases.
As a result, your score would likely drop.
However, this drop should be minimal and short-lived if you have good credit to begin with.
As a precaution, you’ve got the option to even destroy the physical card.
When you settle debt, your lender agrees to take less than you actually owe.
This post has been updated to include more current information.
