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Credit Scoring - Balances (3 of 6)
One of the most misunderstood areas of a credit score is the "balances" part of scoring.  I say that it is misunderstood not because it is complicated, but because people tend to have no idea why their credit score is low, when in fact they are carrying very high balances on their credit lines, a common factor in a low credit score.

I've seen credit reports where people were never late on a payment, yet their scores were in the 580's.  That isn't exactly a score to get excited about.  The credit scoring model views such a person as a higher risk, and grades them accordingly.
Your balance-to-credit limit ratio makes up 30% of your credit score, only second to that of payment history. Here is an example to understand how your balance is calculated: You have a $1,000 limit on your VISA card, and your current balance is $500, so you are at a 50% ratio.  The higher your balance is to the limit, the more it affects your credit score. It is even possible to go above your credit limit, which can really hurt your credit score. 
PRICELESS TIP ... Assuming you have two credit cards with a $10,000 limit for each ... more

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