United Poles Federal Credit Union

Thirty percent of your credit score is based on your credit utilization ratio, also called a balance-to-limit ratio. The ratio is created by dividing what you owe by the sum of the credit limits on all your lines of credit. Let's say you have two credit cards. Card A has a credit limit of $1,500, and you are carrying a balance of $500. Card B has a credit limit of $5,000, and you are carrying a balance of $1,500. Total balances = $2,000 ($500 + $1,500) Total credit limits = $6,500 ($1,500 + $5,000) Credit utilization ratio = 30 percent ($2,000 divided by $6,500) In the example above, your credit utilization ratio is 30 percent. The lower your credit utilization ratio, the better it is for your overall credit score. An ideal utilization ratio is 0 percent, but finance experts recommend maintaining a ratio of no higher than 30 percent. A ratio of 30 percent or lower will have minimal impact on your credit score. Interest rates directly affect how much it costs you to borrow money, so it's important to pay attention to current rates and trends. Take the time to assess your debt picture and look for ways to reduce what you are paying in interest. LOOK FOR A CARD WITH A LOWER INTEREST RATE The higher the interest rate, the more it will cost you to carry a balance on your card. It's always best to go with a card that has a lower interest rate, but watch out for fees and penalties. An annual fee can quickly offset a low interest rate. LOOK FOR A CARD WITHOUT A PENALTY APR The penalty rate is the rate you'll pay on your card if you fail to make on-time payments or if you miss a payment. It is usually significantly higher than the initial rate offered on your card. There are credit cards on the market that don't have a penalty rate, including a Visa ® card from United Poles Federal Credit Union. LOOK FOR A CARD WITH NO BALANCE TRANSFER FEE Once you find a card with a lower rate and no penalty fee, you'll want to transfer your existing balances to it to maximize your savings. Beware of balance transfer fees, which are typically 3 percent of the balance being transferred. Depending on how much you're transferring, that can be a significant amount. TAKE AN INTEREST IN INTEREST RATES WHAT IS A CREDIT UTILIZATION RATIO? 30%

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