| One of the best ways to improve your credit score is | | | | percentage used is 80% ($4,000/$5,000). Nothing is |
| to do a balance transfer and/or request a credit limit | | | | owed on the American Express. In this scenario, even |
| increase. Most experts agree that total balances on | | | | if you did a balance transfer, the overall debt ratio is still |
| revolving accounts should be kept to no more than | | | | 40% ($4,000/$10,000), in excess of the desired 30% |
| 30% of total limits. A balance on any one account | | | | balance to limits quotient. The solution here is to pick up |
| should not exceed 50% of that card's limit. | | | | the phone and request that your limits be raised. This is |
| If you exceed either of these suggested debt ratios, | | | | a standard request and should be granted if you have |
| the best way to solve the problem is to do a balance | | | | paid your bills in a timely manner and have not recently |
| transfer. If you have three charge cards, each with | | | | made a similar request. Once your limits have been |
| $5,000 limits along with a balance on one card of | | | | raised, you can reassess the situation and do a |
| $4,000, the total debt ratio is 26% ($4,000/$15,000). | | | | balance transfer to achieve the optimal debt ratios. |
| However, the debt ratio on the card carrying the | | | | If you still cannot make the numbers work after |
| balance is 80% ($4,000/$5,000). Transfer part of the | | | | requesting credit line increases, the remaining option is |
| balance -- $2,000, for example -- to another card. The | | | | to apply for an additional card. Unfortunately, applying |
| transfer results in the same total debt ratio -- 26% | | | | for new credit can have a negative impact on your |
| ($4,000/$15,000). Fortunately, the individual card | | | | rating. Amount owed contributes 30% to score |
| balances have been reduced to 40% ($2,000/$5,000) | | | | whereas new credit accounts for only 10% of score. |
| of total lines. In this situation, a simple balance transfer | | | | Based on those percentages, the benefit gained from |
| should boost your score. | | | | the addition of a new piece of plastic to which a |
| If you cannot achieve the optimal debt ratios by | | | | balance can be transferred should offset the negative |
| transferring balances, requesting a credit line increase | | | | of applying for a new card. If you feel confident that |
| might do the trick. Let's pretend that you have one | | | | your application will be approved, the good should |
| VISA and one American Express, each with $5,000 | | | | outweigh the bad, but do so at your own risk. |
| lines. Having run up $4,000 on your VISA, the | | | | Copyright © 2008 Wade Young. |