Part of the consideration is the debt-to-income ratio. About 30% of your credit score is based on the total amount of money you have already agreed to pay. When you owe more than you can reasonably pay, you become overextended.

What’s the total?
Most creditors report the total amount you owe (balance) and the total amount of credit available. Even if you usually pay your cards in full each month right on time on the 10th of the month. A balance may show up if the credit report is ordered on the 1st.

What type of accounts do you owe on?
As with part of your Payment History, when considering Outstanding Credit, lenders will look at how much you owe on bank cards, retail cards and installment loans. If you’re looking for a new bank card, the bank will look at how much you owe other bank cards.

Are you too close to your limits?
Besides reporting your outstanding balance and payments, creditors report your credit limit. New creditors look to see how many accounts are near their maximum limit. People who are close to the limit on most of their accounts may have trouble making payments on new accounts, so that drives your score down.

Are you close to the end?
Let’s say you took out a car loan for 60 months (5 years). Let’s also say it was an expensive car. Also, let’s say you only have four months to pay. Most creditors will assume that you are a good risk, even if there were a few late payments over the previous four years. On the other hand, if you bought the car two months ago, they are less confident, because you are close to your loan’s upper limit.

Are you a credit addict?
If you have a large number of credit accounts, even if they have relatively small maximum limits, you show up as a candidate for over extension, and a less-favorable credit risk.

Actions for Better Credit:

• Pay off debt rather than moving it around.
• Keep your balances near 50% of you available limit
• Don’t get new cards you don’t need, like as store cards that give discounts if you act today. This just adds to your available limits.