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total available credit
5 Jun 2020

How Much of Your Total Available Credit Should You Use?

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Are you interested in learning what limitations you should make for your credit cards?

While there might be a certain amount provided to you, it’s often unwise to get close to that number.

Using that credit limit, you should place some borders on your spending amount in order to set yourself up for success. If done right, you can have a positive effect on your credit score.

If done wrong, you might be suffering the consequences for years to come. Here are several common questions about your total available credit amount. Use these answers to develop a plan for your credit card situation.

1. What Does “Available Credit” Mean?

Not all credit cards are created equal. There are better credit cards than most out in the market, and their limits vary accordingly.

However, even if you’ve lined yourself up with a great credit card, you still need to know how they work.

The term “available credit” refers to the limit your credit card provider has set for your account. Going over that credit amount will result in hefty penalties from your provider.

There’s a difference between your card’s available credit and it’s available balance.

For example, say your credit card had available credit of $2,500 exactly. But, you have a few transactions that equal out to a balance of $1,000. That would mean that your available credit is now down to $1,500.

One healthy practice is staying on top of your credit balance at all times. Knowing the balance will help you stay alert on how much available credit you have and help you keep a good credit score.

2. What Happens If You Go Over the Limit?

The answer to this might vary depending on your credit card provider. Some might give a grace period to customers with an exceedingly-good track record.

However, generally speaking, going over will result in further payment in some shape or fashion. That might be an over-limit fee and even an increased annual percentage rate.

The only way to find this answer for sure is to either look back at your contract agreement or reach out to your provider to ask them directly.

Sometimes unforeseen things happen. You might run into an emergency that requires you to go over your limit. If you can, try to resist that urge in order to protect your future (and credit score).

3. What Is a Credit Utilization Rate?

Many people often ask how much of their available credit they should be using in terms of a percentage.

What they’re really asking is how high or low of a credit utilization rate they should strive for.

A credit utilization rate is the percentage of your available credit that is in use. Many people have a healthy practice of not letting their credit utilization rate get any higher than a certain percentage.

This allows them to remain in control of their credit and pay it off easily without any financial setback in doing so.

If you don’t know it currently, then you can determine your present credit utilization ratio by dividing your current balance by your credit limit. After that, multiply it by 100 and that’s your current percentage.

The only ways that you can bring your credit utilization rate down is by either increasing the credit limits, using your credit cards less or a combination of both.

4. What’s the Optimal Credit Utilization Ratio?

So what’s all the fuss about credit utilization scores? In short, they play a big factor in your overall credit score.

The higher your credit utilization ratio, the more you’ll pay for it (pun intended) in your credit score.

Typically, experts will tell you that a ratio of around 30-percent helps your credit score gradually incline or maintain its current standing.

However, the closer you are to that number, the less ascension that you’ll see. For example, don’t expect too much of a boost on your credit score by holding on to a credit utilization rate of 25-percent. That’s not dramatic enough.

If you hope to see a significant spike in your credit score, then you’d be wise to stay around a credit utilization score of 10 percent.

So, for example, if your available credit was $1,000 in total, you’d want to spend no more than $100 to promote your credit score.

5. How Can You Increase Your Available Credit?

Some people refuse to spend any less on their credit cards than they already have.

Others have had an emergency occur, such as medical bills, that have caused them to get closer to their credit limit than they’d like to be.

If that’s the case, then one of your only options might be to increase the overall limit on your available credit.

The two feasible ways of doing that are to either request an increase from your credit card provider or apply for a new credit card. However, they still control how much credit they’re willing to give you on a new card.

In these situations, it’s best to contact your provider and discuss different options with them in order to reach a solution.

Keep Track of Your Total Available Credit!

These are tough times that you’re being forced to endure. However, embrace adversity by paying special attention to things in your finance such as your total available credit.

Be sure to read this article on how service workers, and others that have been furloughed/fired, can get through the coronavirus.

For more inquiries, please feel free to reach out via our customer service center and we’ll be happy to assist you further!