Having balances on revolving credit (credit cards, overdraft accounts, and some lines) can weigh down credit scores and cause higher pricing on loans for individuals and business owners.
Most people incorrectly think 50% or 30% balance to limit ratio on revolving accounts is the right number. As credit experts we know this is false. To get the highest scores this credit category can offer, balances must be no greater than 10% of limits, and whatever balance is kept should be left on 1 or 2 cards rather than spread out over many. Make sure balances are paid down a few months prior to loan application to insure the proper updating has been sent to the credit bureaus.
For a business owner….
Mingling business debt with personal debt can really destroy their ability to get personal loan approvals. From our experience working with businesses of all sizes and owners of all seasons, we have learned that many do not consider the need to repair or build businesses credit not only for the sake of their business but to protect their personal credit.
A business that stays financially tied to the founder’s personal credit can ruin his/her chances of gaining personal loans or cause much higher pricing, in turn diminishing the owner’s ability to reach certain home ownership goals. By not focusing on the state of the businesses credit opportunity for growth, greater success, and profits may be passed by without any knowledge on the part of the principal(s).
Reach out to one of our Credit Specialists for a free business or personal credit analysis, individuals and businesses who understand and monitor their scores are in a better position to achieve greater prosperity.
Remember: no matter how few or many accounts you have, if your balances are high, your score will drop dramatically. Balance to limit ratio’s on credit cards affect scores on both an aggregate and individual account basis.