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How to bump up your credit score

Leslie McFaddenQuestionDear Credit Card Adviser,
Say I have a credit card with a $3,000 limit and $2,600 of it is used. I don't want to pay it off, but I do want to make a large enough payment that I get a bump in my credit score. I have heard the magic amount is 45 percent or less of the total card amount; is that true? How soon would it affect a credit score if I made a payment of $2,300?
-- Jamie

AnswerDear Jamie,
When you need to increase your credit score ahead of an upcoming credit check, it pays to know how low your credit card debt should be. With FICO scores, a credit score used by many lenders, your debt-to-credit limit ratio on revolving accounts, or utilization, counts toward a factor worth 30 percent of your score. It's not the only component that goes into your score, but low utilization can push your score higher.

Is there a threshold for this ratio above which your score will drop and below which your score will increase? I've heard varying recommendations of using less than 50 percent of your available credit -- 35 percent, 30 percent and even 10 percent. The recommendations for ideal utilization are all over the place.

The lower your utilization, the better. A utilization ratio of 10 percent is going to be better than 30 percent, which is going to be better than 50 percent.

FICO doesn't usually recommend a specific threshold, but recently provided one on its new educational website, In the score tips section, the site offers this advice regarding utilization: "You may want to increase the amounts of your monthly payments until all balances are below 10 percent of your credit limits in order to improve your FICO Score."

In a recent interview, I asked FICO spokesman Craig Watts about this new recommendation.

"Last year we started using a number, not as a recommendation, but as a fact that most of the people with really high FICO scores have credit utilization rates that are 7 percent or lower," Watts said.

"Somebody softened that to 10 percent as a decent threshold. If your utilization is 10 percent or lower you're in great shape -- as far as utilization goes."

There you have it. For maximum score benefit, pay your balance down to 10 percent or less of the credit limit. In general, the lower your utilization, the better. Not that you need to carry a balance to earn low utilization. You can pay in full every month and still have a monthly balance on your credit report -- this will be the amount on your last monthly statement.

Once the payment shows up on your credit report in the form of a lower monthly balance, then the new balance can factor into the next calculation of your credit score. Most credit card issuers submit updated account information to the credit bureaus on a monthly basis, so your score may not reflect the new balance right away.

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To ask a question of the Credit Card Adviser, go to the "Ask the Experts" page, and select "Credit Cards." Read more columns by the Credit Card Adviser. Follow Leslie McFadden on Twitter.

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