How Having a High Credit Card Balance Can Hurt Your Credit Score
You know you're not supposed to exceed your credit card limit, but did you know that just getting close can hurt your credit score?
Every month that you carry a high balance on one of your credit accounts, you look like a risk to lenders - even if you eventually pay that balance off in full, say Chicago bankruptcy attorneys. The good news is, the damage is only temporary, assuming you maintain good credit habits like paying your bill on time and not actually going over your limit. The bad news is, it can really hurt you if you ring up that large balance at the wrong time.
See, your credit score can go up and down each month, depending on a number of factors - one being the amount of available credit being used, known as utilization. When your credit card company reports your balance to credit bureaus, the bureaus tally up a score based on the information they have at the time. So even though you might normally keep a low balance - even if you have a history of responsible behavior - any lender who views your credit report that month will see you as somewhat of a risk, because risky borrowers tend to charge a lot.
There's nothing wrong with putting an occasional large purchase on your credit card if you know you can pay it off. However, you should be aware that it can skew your credit history immediately after. So you may not want to ring up a large balance if, say, you're planning on applying for a loan or signing up for a new credit card.
Of course, if you're regularly charging close to - or over your limit - your credit score is going to suffer, and not temporarily. The best way to break the credit card cycle and rebuild your credit is to get rid of your debt. If you can't seem to manage it alone, bankruptcy might be your best bet. Bankruptcy can offer a realistic debt payment plan and legal protection - so you can finally stop making excuses and get down to business. Not sure if bankruptcy is right for you? Find out more with a free personal debt analysis courtesy of a Chicago bankruptcy attorney.