Welcome to the forth edition of Credit Score Bootcamp. Last time we talked about the number one factor to repairing your credit score, this time we'll talk about the second biggest factor in your score: the amount you owe in debt.

Living within your means is easier said than done! If you give me a credit card with a $5,000 limit and I spend it, I assume I'm good as long as I pay the minimum due by the due date. Wrong Answer!

Your credit score is going to drop because you are not using your credit wisely. I'm sure when you got your first credit card, no one told you to use it wisely. Well I'm telling you to use your credit cards wisely because maxing out those credit cards and other revolving credit can cost you up to 50 points on your credit score. And the higher your score the more it will plummet, you can be loosing 70-80 points!

To keep a healthy credit profile, you need to keep All Credit Card Balance Under 1/3 The Credit Limit. Here are a few examples.

  • If you have a credit card limit of $1,000, keep that balance under $333.
  • Be careful with those $300 secure credit cards, you don't want to leave a balance over $100 on them monthly.

Don't go closing those credit cards while you are building your credit score either! You will loose points under the "Length of credit history" portion of your credit score. Stay tuned,I will be discussing this topic of length of credit history in my next article.

Bootcamp Challenge: document all those credit card limits, current balances, and figure out where they need to be (hint: remember the 1/3 rule).

If you'd like to learn more about Guest Author and Expert Coretta Herring, visit Pathways to Financial Empowerment for other great credit and financial empowerment advice.

Want to read more from this Boot Camp series?
Click here to read Part One: Overcoming Credit Obstacles to get a Mortgage, read Part Two: What to do to Fix your Credit Score, or Part Three: Fix your score by mastering your payment history.

Preparing To Be A First-Time Homeowner In Milwaukee? Click here for 5 Things To Consider or consider clicking here to learn about how to buy a house in Milwaukee.

Want to know if this program could work for you?

What we look at See homes

Written by Coretta Herring, Pathways to Financial Empowerment

Coretta Herring is Financial Coach for Pathways to Financial Empowerment and Real Estate Agent for Any House Realty. Prior to that she worked for Keller Williams and ACTS Housing serving as a counselor helping individuals renting properties owned by the City of Milwaukee transition into homeowners. Coretta has more than 13 years of credit counseling experience, serving, most recently, as the Financial Opportunity Center Program Manager for Riverworks Development Corporation. Corretta previously worked for the City of Milwaukee Neighborhood Improvement Development Corporation as a Community Outreach Liaison and, for a decade, at the Boys & Girls Clubs of Greater Milwaukee, most recently as the Family Service Director. She has a Bachelor of Arts degree from Upper Iowa University. Many years prior to joining ACTS, Coretta purchased a home through ACTS in the ACTS North neighborhood, where she currently resides. You can email her at pathways2financial@gmail.com.

Written for us in 2015. Roles, employers and contact details may have changed since.

Back to all resources