Turns out our scores are not just a reflection of our ability, or lack thereof, to pay on time, but they tell a story of how we run our lives. If there’s a blip in that story, say a 30-day late payment, the red flags pop up and all those years of paying dutifully can fall flat quickly.

Much attention has been focused on credit scores during this recession as consumers have struggled to keep up with their mortgage payments and revolving debt. Many consumers — even those who have long had outstanding credit ratings — have complained that their scores have fallen as credit-card companies slashed limits and closed inactive cards.

Focus on your report

The most important information in your credit report is your bill-paying history. It bears repeating: Pay your bills on time every single month. A whopping 35% of your FICO credit score is tied to that payment history.

Another 30% of your score is based on your outstanding debt. Lenders expect you to use credit cards but to do so prudently. If you have three credit cards with a total of $30,000 in available credit, they will look at how much of that you’re using. That’s called your utilization rate. Don’t max those cards out. In fact, don’t even come close to it.

Figuring out your utilization rate is easy math. Add up all your outstanding balances and divide by your total credit limit, which should produce a number less than 1. If it hits 1, you’re maxed out.

The truth about your credit limit

Most credit experts, including the credit bureaus, will advise you to keep your credit utilization under 30% of the total limit.

But here’s a secret: Make sure you do it for each card. If you exceed that threshold on one card — say you use 70% of that limit but only 10% on another card and nothing on a third card — you’re under 30% of the total limit, but you’ll still get dinged for using so much of the limit on the first card.

How much of your limit you use in any given month can turn the tide on your card. If, for example, you max out your American Express card every month but pay it in full, you can still get slammed for hitting your limit. The credit card companies don’t report if you’ve paid off your card; only how much you spent.

“Whether you pay in full or not is not relevant,” said Maxine Sweet, vice president of public education at Experian. “If I charge $5,000 this month, the credit history is not going to know if that $5,000 is part of a longer-term bill or not.

“From a scoring standpoint, what’s important is: How does my balance of $5,000 compare to my total credit limit?”

We hope this helps to keep you on track on purchasing your Ivory Home. Click here to learn more about how Ivory can help you restore your credit and to schedule your free credit repair consultation. At Ivory Homes, You Matter! Start restoring your credit today!