The Amount of Revolving Balances Is Too High - Experian (2024)

FAQs

The Amount of Revolving Balances Is Too High - Experian? ›

The only way to remedy the amount of revolving balances being too high is to pay them down. Closing open accounts or lowering your limits on existing accounts would likely harm your credit scores by leaving you with less available credit. Keeping your credit cards open and active is good for your credit.

A revolving balance accrues interest, which is why some smart credit card users pay off their statement balances every month, never paying interest. High revolving balances may indicate that a borrower is relying too much on credit. That is why it is important to keep revolving balances to a minimum.

Both revolving and installment credit accounts allow you to finance purchases, but the terms are different. Revolving credit allows you to borrow, pay back and borrow again. With installment credit, you can borrow a lump sum and repay it with fixed payments.

Experts recommend that your credit utilization ratio be no higher than 30 percent if possible.

The reason you received for your score going down—"percent of balances to credit limits is too high on revolving accounts"—indicates an increased balance on one or more of your credit cards as reported to Experian, which caused your utilization rate to increase.

Experts generally recommend using less than 30% of your credit limit. As you pay off your revolving balance, your credit score will go back up since you are freeing up more of your available credit.

As you keep paying off your revolving balance on your credit card, your credit score will go up and you'll free up more of your available credit. Whereas with an installment loan, the amount you owe each month on the loan is the same, and the total balance isn't calculated into your credit utilization.

Closing a credit card could change your debt to credit utilization ratio, which may impact credit scores. Closing a credit card account you've had for a long time may impact the length of your credit history. Paid-off credit cards that aren't used for a certain period of time may be closed by the lender.

How to get 800 credit score? ›

Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.

All major credit bureaus (Equifax, Experian, and TransUnion) recommend that you keep your revolving utilization rate below 30%. The lower your rate, the better. Here are a few ways you can reduce your rate. If you can, pay off your credit card balance every month.

So, while there is no absolute number that is considered too many, it's best to only apply for and carry the cards that you need and can justify using based on your credit score, ability to pay balances, and rewards aspirations.

You should use less than 30% of a $1,500 credit card limit each month in order to avoid damage to your credit score. Having a balance of $450 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.

Helps keep Credit UtiliSation Ratio Low: If you have one single card and use 90% of the credit limit, it will naturally bring down the credit utilization score. However, if you have more than one card and use just 50% of the credit limit, it will help maintain a good utilization ratio that is ideal.

While a 0% utilization is certainly better than having a high CUR, it's not as good as something in the single digits. Depending on the scoring model used, some experts recommend aiming to keep your credit utilization rate at 10% (or below) as a healthy goal to get the best credit score.

The best way to lower your credit utilization ratio is to pay off your credit card balances. Every dollar you pay off reduces your credit utilization ratio and your total debt, which makes it a win-win scenario. Plus, paying off your balances means no longer having to pay interest on those balances.

Lenders typically prefer that you use no more than 30% of the total revolving credit available to you.

A general rule of thumb is to keep your credit utilization ratio below 30%. And if you really want to be an overachiever, aim for 10%.

Revolving credit is good to have in many cases, such as when you need access to funds and you want to pay them back over time. But, if not used responsibly, revolving credit could cause financial strain.