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Question By
babdelnour

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To improve my credit score it says to keep my debt-to-credit ratio low (1-9%), what does that mean?
I will give an simple example to make my point more clear:
Let's say for example I have only one credit card with $1000 credit limit. Let's say in the beginning of the billing month I make a $500 purchase, but I pay it 5 days later. That is I pay it before the statement for the month closes, so it won't appear on my statement balance. And let's say that I make it another credit card purchase that same billing month of $80, but I don't pay it and it shows in my statement balance. In this case is my maximum debt-to-credit ratio (or credit utilization) 8% or 50%?

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The amount you owe at the time of the statement will determine your utilization rate. So if you owed eighty dollars at the time that the statement comes out, then you would be utilizing eight percent of your credit line, it wouldn't matter how much money you ran through the card for the month and paid off, it only matters what you owe at the time of the statement and that would be the amount reported to the credit bureaus.

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