About Financial and Investment tips

Your credit score or more importantly your FICO scores are highly important to your financial life. These scores will tell a company whether you are a high risk to them. If you show up as a high risk they could turn you down for a loan. People who need money quickly and get turned away for a loan often try desperate measures like cash advances, which causes even more debt problems in the end. Cash advances are short term loans that have to be paid back within 16 days or less of the deposit being made. There are also hefty fees associated with these loans. Your financial future is so dependent on your scores that you need to understand what debt to credit limit ratio means. If you are unaware of this term you could be affecting your financial health for the worse.

The debt to credit limit ratio or debt utilization is what is used to help formulate your credit score. This ratio is calculated by dividing what you have spent versus your total credit limit. Credit cards are the best examples we can give you for the debt to credit limit ratio. On your credit card you are given a credit limit. This limit, for an example, can be $5000. If you have used $4000 of this credit limit you have left only $1000 unused or 20 percent of the credit limit is unused. Alternately this means you have used 80 percent of your credit limit offering you a debt to credit limit of 80 percent. This signals to a lender that you are a high risk borrower.

If this is the case your APR may be increased or you could be denied a loan to pay off your credit card debt. For instance, if you want a personal loan to pay off your credit card debt they may refuse this. About 14 percent of Americans have a ratio of 50 percent for their debt to credit limit ratio.

If you want to effectively strengthen your debt to credit limit ratio and thus your credit scores you need to be below 30 percent on that ratio. If at all possible you should never be more than 10 percent in a debt to credit limit ratio. For a limit of $5000 you would want no more than $500 a month on your credit card or any debt.

If you want to keep a good credit limit you have a couple of options. You can pay off the debts you have. This would reduce your credit limit offering you a good ratio. You could also ask the credit card company to raise your limit. If they raise your limit you will instantly have a better ratio. Unfortunately, this second option is a little tougher right now as credit card companies are lowering limits. If you do get your limit raised you still have to work on lowering your debts. Most of all remember that your actions will directly affect your debt to credit limit ratio, even if you have very little credit.