The Shakiba Report: Lowering your credit card utilization rate

What's your credit card utilization rate and why does it matter?

HOUSTON – For many consumers, it's easy to swipe your credit card when making a big purchase.

However, increasing your credit card utilization rate can have a negative effect to your credit score. 

 A new report from CompareCards.com says Houston has the 5th highest rate at 32.7%.

Trevor Shakiba, private wealth advisor with Ameriprise Financial, shares his top financial tips when it comes to lowering your utilization rate. 

Every dollar counts, to pay off those balances. - Trevor Shakiba

What’s your credit card utilization rate and why does it matter?

  • First, what exactly is a credit card utilization rate?
    • It’s the comparison of your balance to your available credit
    • $3k in credit card debt with a $10k limit = 30% utilization rate
    • The lower the better
  • Your utilization rate is the 2 nd most important factor in determining your credit score
    • Only your payment history is more important
    • Houston has the 5 th highest rate at 32.7%
    • Houston also has an average credit card balance of over $5,500
  • So, what can you do to improve this? Pay down the balances!
    • This goes without saying!
    • Experts say to keep your rate below 30%
    • I recommend keeping it at 0%
    • Do anything and everything to eliminate high interest credit card debt!
    • High interest debt is THE biggest impediment to building wealth
  • Increase your credit limit!
    • Caution!  Be careful here not to simply charge more!!!
    • 64% of cardholders who asked for a higher limit received one
    • Average increase was more than $2,000
  • Add another card to your wallet!
    • As above, make sure you don’t go on a spending spree!
    • It’s all about the Math.
    • Lower balances on all of your cards equals a lower utilization rate
    • Take advantage of 0% introductory offers as well!