Poor credit utilization scores are a
leading cause as to what fuels applications for payday loan companies. People
who are no longer able to receive new lines of credit, have had their credit
limits lowered by the creditors or cannot seem to pay down on their maxed
balances seek out alternative money options. The short-term loan industry is
tarnished with bad reviews yet remains one of the top alternative options.
Maybe it is their simple online
applications which make these short-term loans so inviting. It makes for a good
day when you can apply for a direct loan in your pajamas and have it directly
deposited into your bank account the next business morning. That is convenient!
In all its glory, these fast payday
loan direct lending companies have made it easy for those who should be looking
at cutting back on their expenses and lowering their debt. Instead of solving
the problem of having poor credit, people seek out quick fixes. Before any more
third party money is used, credit utilization rates should be understood.
Credit utilization rate is based on
the ratio between how much you owe creditors and how much you could potentially
owe. Take all of your credit card statements and set them on the table. Get
yourself a calculator and find the sum of the outstanding balances for them
all. This is your aggregate credit card debt. Next, go back through your
statements and find the sum of the credit limits. This will tell you that if
you charged every penny on each card, you could potentially be that much in
debt. Finally divide the aggregate debt by your potential debt to find your
credit utilization ratio. The higher your score, the worse shape your credit
score is in. Since this ratio is used as approximately one-third of your credit
score, it should be taken very seriously.
Individuals do have control over
what direction their credit score moves. If you are looking to improve your
number, then it is good to start by looking at the real scenario. How much is
your take-home income each month? What is your total budget for monthly
expenses? Is there anything left-over? What would be the best use of that
money?
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