How to Build Loans Fast | Personal finance
- Prepayment required
- May charge high annual fees
- Fees come from your deposit, which reduces your available balance
- Low credit limit
- No perks or rewards
6. Ensure good loan utilization
Once you have an active credit card it is tempting to use it as often as the credit limit allows, but this will actually put you off from a good credit score. There are good and bad credit turns even when you have good payment history. In fact, credit utilization is the second most important factor in creditworthiness after payment history.
A loan utilization rate divides the current revolving loan debt by your maximum credit limit. The resulting number, expressed as a percentage, reflects your loan utilization rate, that is, how much loan you are using in relation to your loan.
Imagine you have a credit card with a cap of $ 8,950 and the running balance is $ 2,332. $ 2,332 divided by $ 8,950 is 0.26, which means your loan utilization rate is 26%.
Good credit utilization can be summed up in one rule: don’t use more than 30% of your available credit. If a secured credit card has a limit of $ 300, it means that the running balance should never exceed $ 90.