Credit scoring system more detailed than one would think. Many consumers don't realize that credit scores
are impacted by a wide variety of factors. In fact, only 35% of the credit scoring model is influenced by delinquencies and/or
late payments. The other 65% is comprised of various other factors, about which people are less informed. The second
largest category is that of available credit balance, which comprises 30% of the score. As an example, if an individual had
$25,000 in credit card debt spread out over 2 credit cards with maximum available limits of $15,000 each, this particular
consumer would be severely penalized because they are using $25,000 of their $30,000 of available debt. If that same
person opened up 3 more credit cards with credit highs of $10,000 each and then spread those balances over the 5 cards
they now own, with a total available credit high of $60,000, that same $25,000 in debt would significantly reduce the penalty
on their credit score. This is why consumers are often advised not to close credit cards, because this could negatively
impact their score. By closing credit cards, the consumer effectively reduces the amount of available credit and increases
the ratio of used credit versus available credit, which is a big no-no.
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