When was the last time you looked at your credit score? About 27% of people check their credit scores less than once a year.

That means that they have no idea if there are errors on their credit report or how they’re managing their money. A credit score has a big impact on every part of life, and the less that you know about your credit, the less power you have to make smart financial decisions.

A large portion of your credit score is determined by your credit card balance.  What is a credit card balance that will lower your credit score? Read on to learn how your credit score is determined and what credit card balance you should have to get a great credit score.

Why Does Your Credit Score Matter So Much?

Have you ever stopped to wonder why your credit score is so important? Think about it for a moment. Your credit score affects every part of your life. Your ability to get a loan at a low interest rate depends on a low credit score. Same with your ability to get an apartment or a job.

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Lenders and landlords look at your credit score to make sure that you’re responsible with your finances. They’ll make a judgment about you based on those numbers, regardless of your character or personality.

How Does Your Credit Card Balance Impact Your Credit Score?

There are a lot of factors that impact your credit score. Believe it or not, your credit card balance is a big part of that equation. Here’s how your credit score works.

There are several credit reporting agencies. The big ones are Experian, TransUnion, and Equifax. Each bureau has its formula for calculating your credit score.

On top of that, there are different methods of calculating your credit score. There’s the FICO score, Vantage 3.0, and more. Each credit agency uses a different scoring method.

The factors are mostly the same across the board, they’re weighted a little differently. Experian will put the most weight on your payment history and credit utilization score will account for 65% of your credit score. In other words, you need to have a low credit balance and pay your credit card bills on time.

Your payment history, credit utilization, how much you owe, how long you’ve had credit, credit inquiries, new credit, and types of credit are all factors in your credit score.

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Your credit score will range from 300-850. The higher your score, the better. In most cases, a credit score above 700 is considered to be good. An excellent score is considered to be 800 or above.

If you don’t have a good credit score, it doesn’t mean that you’re shut out of a loan. There are plenty of options if you have bad credit. You want to make sure that your credit score is as high as possible before you apply for credit.

What is Credit Utilization?

At the heart of your credit score is something called credit utilization. This is basically the ratio of how much credit you have available and how much you have in debt.

Here’s an example. Between personal loans and credit cards, you have $20,000 available in credit. Yet, your balance owed is $10,000. Your credit utilization rate is 50%.

When you ask what is a credit card balance that can help you improve your credit score, it really depends on how much credit you have available.

Credit utilization can take up as much as 30% of your credit score, depending on how heavily the credit scoring method weighs it. In any case, if you want to quickly improve your credit score, your credit balance is a great place to start.

Now that you know how your credit balance impacts your credit score, how much do you need to have paid down to impact your credit score? The bottom line is that the lower your credit utilization ratio, the better.

How Can You Pay Down Your Credit Card Balances?

A key to a better credit score will be paying down your credit card balances. How can you do that, even when you have a limited budget? Here are a few tips that will help you.

The Minimum Payment Trap

Where a lot of people get stuck in credit card debt is that they pay off the minimum amount each month. While that’s a great thing because you’re not late on your payments, you’re barely scratching the surface of paying down your balance.

That’s especially true if you have a high interest rate. Let’s take a look at an example. You owe $1700 on one credit card. Your minimum monthly payment is $45. You pay that $45 each month, but the needle on your balance owed doesn’t seem to move, even if you haven’t used your card in months.

That’s because your monthly interest charge is $38. Most of that monthly payment is going towards your monthly interest payment, while only $7 each month is going towards the balance.

That’s why it can take 10 years or more to pay off a credit card when you just pay the minimum monthly payment.

A good rule of thumb to pay that balance down faster is to double the minimum monthly payment. This will ensure that your hard earned cash is doing more than making money for the banks.

Create a Budget

In an ideal situation, you’ll pay off your balance as quickly as possible. That’s not always possible when you’re financially strapped.

You may have to get creative with your budget so you can pay off more of your balance each month. That may mean temporary sacrifices of your spending habits.

Your budget may not have to be all about cutting expenses. You may be able to pick up a side gig or find plenty of creative ways to make a little extra cash every month. You can pick up extra hours at your job. You can also pick up

Lower Your Interest Rate

Have you made your monthly payments on time? Your credit card company just might reward your for your loyalty and promptness.

You can call your credit card company and ask them if there’s any way you can get lower interest rate. Some credit card companies are happy to do that. They want to keep you as a customer, and they’ll do what it takes to make you happy.

They won’t make your balance go away, but they can help you pay it off faster by lowering your interest rate.

Use More Credit to Your Advantage

There’s another way to lower your credit utilization score to improve your credit score. It’s a little counter-intuitive because it involves having more credit.

Think of it this way, if you have $20,000 in available credit, you can get additional credit to give yourself more available credit.

Let’s say you apply and are approved for a new credit card for $5000. You don’t touch the credit card, you just know that it’s there. Your credit available is now $25,000. If you have the same $10,000 balance, then your credit utilization ratio is now 40% instead of 50%. That can improve your credit score quite a bit.

Again, the catch here is that you can’t use the available credit, just continue to pay down your existing balances and you’ll see your credit score improve rather quickly.

The other thing to consider is that applying for credit will impact your credit score. The more hard credit checks you have on your credit report, the lower your score. Typically, it’s worth it because credit utilization rate has a higher impact on your credit report than hard credit inquiries.

The impact of credit inquiries also lessens over time. If you have a credit inquiry now, the impact will be lower 6 months from now. You’ll see a slight drop in your credit score, and it will bounce back in 6-9 months.

Where this isn’t the case is when you have more than two hard credit checks on your report over a two year period.

You just can’t go out and apply for 6 credit cards at once. Be strategic and apply for one card and one card only. That’s how you maximize the positive impact of using credit to improve your credit score.

What is a Credit Card Balance for Top Credit Scores?

Your credit score impacts almost every aspect of your life. It impacts your ability to get a loan, your ability to get an apartment, and even a job.

If you want to move forward in your life, you need to make sure that your credit score is as high as possible.

What is a credit card balance to have a lower credit score? It will depend on how much credit you have available. Generally, the lower your balance the better.

A couple of ways you can lower your credit utilization rate is to pay down your debts quickly and take out more credit and don’t use it.

Ready to get started? Take a look at these credit cards that you can apply for today.