Spread the love











4 Shares

Credit is a funny game. A good bit of your credit score does not come down to how much you owe as how you categorize it. This is particularly true with credit cards. Whatever you do, avoid maxing one out unless you don’t mind seeing your credit score take a ding.

The credit-to-debt ratio is an important calculation in the personal finance world. It is an indicator to lenders as to whether you are a good risk or not. Most people view this to mean that the ratio applies to their overall credit. While it does, it also applies to individual cards as well.

Why must you avoid maxing out a credit card? The answer is it risks a credit score downgrade. The debt to credit ratio makes up 30 percent of your total credit score. If you max out your credit card limit, this ratio is negatively impacted and your score drops. More importantly, any loans you seek will result in the lender seeing the scant available credit on the card. They will consider you a large risk and potentially deny your application.

Another reason you should not allow this is that when your card max out, you will need to pay off a portion of the balance in order for you to use the card again. some company will go ahead and freeze your account which makes the card useless. This will result in dropping of your credit score because credit score is based on how much readily available credit you use.