Do You Know How Many Points Your Credit Score Drops When You Max Out A Credit Card?

By now you probably know the basics concerning what factors impact your credit score. This includes the top 4 credit report items to monitor. But, do you know how many points your credit score drops when you max out a just a single credit card?

What Are The Risks Of Maxing Out Credit Cards?
It is no secret that maxing out all of you credit cards is a bad thing. Not only will that bring your debt utilization ratio (the amount you owe compared to your total available credit line) to 100%, but the required monthly payments calculated at high credit card interest rates increase the chances that you will struggle to meet your obligations.

So, even if you have a perfect payment history, you will never want to max out even one card that you are maintaining. This will hurt your score even if you have other credit cards with small or no balances at all. The part of the credit score formula that looks at your total debt utilization ratio looks at two factors; first, how much credit you are using overall and second, the ratio of used credit line to available credit line on each individual credit card which you maintain.

Credit Score Points Drop When You Max Out A Credit Card
Fair Isaac Corporation is the mastermind behind your FICO credit score. I read in a Time magazine article that a simulation conducted by FICO revealed resutlts that showed that maxing out a single card causes a drop of between 10 and 30 points on a credit score for someone with a score of 680. Now if you have a higher score, the decrease is more significant; maxing out a card with a score of 780 will erase anywhere between 25 and 45 points. So there you have it. More facts to remember and fewer myths directly from the horse's mouth.

24 Intimate Facts Your Credit Score Ignores
We spend a lot of time sharing information about what impacts your credit score. But there are a lot of myths out there that people believe regarding their credit score. Is your age included in your credit score calculation? What about all the inquiries made by lenders to review your account with them? Check out our list of 24 intimate facts that your credit score ignores. You won't have to worry about your credit score dropping for any of these reasons.

About the Author:
Nathan Randall, editor, DailyDollar Newsletter provides free daily advice on money matters plus coupons and discount codes. FYI...you can now access the DailyDollar Newsletter via iTunes podcast, YouTube video, and on Facebook and Twitter too.

Article Originally Published On: http://www.articlesnatch.com

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