Credit utilization is the ratio of your credit limit that you can utilize. To calculate your credit utilization, you can sum up all the balances of your credit cards, and then you have to divide them by your total credit limits. The percentage value you get is called credit utilization.
Credit utilization is one of the main factors that affect your credit score. When your available credit utilization is less, your credit score is good. Certain tips will help lower your credit utilization and boost your business credit score.
5 Important Tips To Lower Your Credit Utilization
If you aim to lower your credit utilization and build a great credit score, you must follow the below-mentioned tips –
Track Your Credit Card Spending
You need to keep track of your spending through each credit card. You don’t need to spend too much limit on one card. Rather it is necessary to switch your spending to another card whenever you have spent around 30% of the credit limit of a card and try to make a Payment Settlement on time every month. You can also make payments twice a month. This is one of the best options to lower your credit utilization.
Higher Your Credit Limits
It would be best if you always went for higher credit limits to lower your credit utilization ratio. Ask your financial institution for the same, or in some cases. It will increase automatically if your payment history is good. If you can increase your credit line, you will now control your spending, and you can simultaneously lower your credit utilization ratio. If you know how to check a business credit score, you can see the results yourself after trying this method.
Follow Balance Alerts
You need to assign balance alerts to your credit card to lower your credit utilization ratio. These balance alerts help keep you reminded of your spending and on-time payments. The aim should be to keep your credit balance as much as possible and keep the spending limit below 30%.
Track Your Credit Report Timing
If you see your credit report online, you will find a particular time of the month when your credit issuer reports your credit history and balances to the credit bureau.
Now, if your payment due date is after that day, there will be an impression that you have incurred a huge balance with you.
But that is not true. This is going to impact your credit utilization a lot. To avoid this scenario, you can make advance payments to your credit issuer and lower your credit utilization.
Manage Your Dues and Balances
The last tip is to always keep track of your dues and balances. If your payment cycle is not running smoothly, you might face difficulty repaying your dues on time. This may impact your credit utilization ratio by affecting your Company’s CIR.Â
That’s why you must keep a close watch on payment defaulters, if any, and take preventive measures to control your credit score and credit utilization ratio.
CreditQ can provide a suitable platform where you can easily make payment settlements and monitor your payment cycle.
You can easily build a great business credit score with CreditQ. Also, they can help you run your credit risk management system efficiently. Using their platform, you can also report payment defaulters in case of fraud.
