Arizona residents who are trying to improve their credit rating or build a good credit history should keep track of their debt to credit limit ratio. Having a good credit score involves more than just paying off credit card debt in a timely manner; it also involves not using most of someone’s available credit. Individuals may assume that if they have a credit card with a high credit limit, as long as they make regular payments, their credit rating will improve even if they stay close to the card’s limit.

In fact, keeping credit cards close to their maximum balance can prevent someone’s credit rating from improving or slow the process down. A debt to credit limit ratio is calculated by dividing the total amount of debt people have by how much credit is available to them. People should attempt to keep their debt to credit limit ratio at or below 30 percent, according to VantageScore Solutions. Consumers who have the highest FICO scores are those with an average ratio of seven percent, no matter what type of credit score type is being looked at.

One way people can improve their debt to credit limit ratio is to make sure they pay their credit card bills before the statement closing date. These ratios are calculated based on information provided to credit reporting bureaus, which come from people’s statements. By ensuring payments show up on statements, people can reduce their reported debt to credit limit ratio.

If someone is having trouble keeping up with credit card payments, they may want to consider filing for bankruptcy. A lawyer could help someone understand if filing is right for them and how the process works.

Source: Main Street, “Analyze your debt to credit limit ratio”, Deepa Venkatraghvan, July 15, 2013