Two new statistics have come out from Vantage Score, the new credit scoring model that advertises as being fairer and more realistic in scoring. Let’s look at what’s going on…
Stat #1 Credit usage is down. The average balance-to-limit ratio is 51%.
Down is good, so to all who are working to pay down your balances: way to go! You’re almost at a tier level for a higher score. But we want to see that balance 2% lower.
When you get your balance at 49% of the limit, then you should see a credit score improvement. So be encouraged and keep on paying off that balance. Below 50% is a marker on your way to your main goal.
Your main goal for credit card usage is to keep your balance at 0% or up to about 29%. If it’s at 10%, even better.
With a low balance-to-limit ratio, you gain credit score points. You do not have to use your credit card every month, once you have had it for at least six to twelve months, so if the balance is at $0 for awhile, that is fine.
To prevent the creditor from closing down your card and lowering your “credit available” number, do use your card at least once a year. Each creditor has its own rule about how long they’ll let you go without using the card before they shut it down, so you need to call and ask your individual card service department if you’d like to make sure.
When they shut down a card for non-usage, then oftentimes a person’s score goes down, because their overall “credit usage-to-credit available” ratio lowers. However, in situations where a person has an over-abundance of credit cards, then it is no problem. If that ratio goes from 19% to 15%, for example, I wouldn’t expect to see any loss of points.
Stat #2 Delinquent payments is up. This is bad news any way you want to look at it.
A late payment always hurts your credit score, and the newer the delinquency is, the more points you lose.
A credit card late payment is one of the most difficult negative items to get removed from a credit report, so never think it’s no big deal and you’ll dispute it later. If the late payment is factual, then you might be living with the consequences for a long time.
If your cash flow is down for the month so that you don’t have the funds in your checking account to pay the credit card, then take cash out of savings to pay it (if you have a savings account). Or do your best to sell something, or make some quick money via a side gig so that you can at least make the minimum payment before it goes late.
The way to use your credit card to best advantage is:
1) to maintain a $0 to low balance at all times,
2) to pay the full amount due with each billing statement (and never carry a balance month-to-month), and
3) to always pay on time.
If you’re working at paying down debt, good for you! You are on the right path. Keep going. When you no longer carry a balance, you’ll stop wasting money on high interest charges that go to mega-rich creditors — and that will feel so good!
