Cheryl Knowlton: Hi, everybody. Cheryl Knowlton with Dynamite Productions, coming at you for episode two of Improving Your Credit with Clay Johnson, Castle & Cooke Mortgage. Okay, let’s talk about balances versus credit limit.
Clay Johnson: Yes. And that’s … Credit lates will definitely have an impact on you, but one of the things we’ve seen hit those just as significant is when you’re balanced compared to how much you have available on a credit line. If that gets too high up, the negative impact that we’ll start to have. Especially when you go past 50%, it starts really hitting you. So, if you have a $10,000 credit card, and you have $8,000 or $9,000, that’s going to start pulling your score down pretty significantly.
The funny part about that is, it has just the same impact on very small trade lines. We see a lot of folks that don’t have a lot of active trade lines. Maybe they have an overdraft Visa or something that has a $500 credit limit. If that’s sitting at 400 bucks, it’s really hitting their score.
Cheryl Knowlton: So keep it down to less than 50.
Clay Johnson: Keep it down under 50% ideally. If you can keep it under 25%, even better, but 50% or less is a great sweet spot to be in. And a lot of times, one of the things we do is when we pull a credit report that says this person has the ability to be at a 740 instead of the 698. And so, we look at that, we run it, it says, “Here’s how many dollars you’re going to need.” You just pay down those balances a little bit, and it can make a huge impact on their credit score.
Cheryl Knowlton: That’s magical.
Clay Johnson: Oh, I love it. And their mortgage insurance. Mortgage insurance is so credit score-driven, now, too. So, both those factors that can have a significant impact, so we love giving people that opportunity.
Cheryl Knowlton: That is so great. And homeowner’s insurance is also credit score-driven, as well. So, all the great reasons to get that score up.
Clay Johnson: Yeah. If you have any questions, let us know. We’d love to answer it. We’ll be hitting a couple of other secrets and tips in the next few days, but until next time, bye-bye.
Cheryl Knowlton: See you then.