When Balances Affect Your Credit Score
You pay your bills on time and have done so for several years. You only have a few credit cards open and always pay at least the minimum payment. When you check your credit report and find that your score is lower than you were expecting, you know it must be a mistake, right? Not necessarily. Many variables factor into creating your credit score, but you may not realize that your credit card balances can negatively affect the score, even if you pay them on time.
Lenders are interested in how much money you owe relative to your credit limits. Generally, it is best to keep your credit card balances at 30% of your credit limit. This means you shouldn't be charging above about $3,300 on your card if your credit limit is $10,000, even if you plan on paying the entire amount off. Several things can help you keep your balance within this limit to raise your credit score.
Our Recommended Credit Report Services:
Free Credit Report With Trial! - This great resource will give you a free credit report and trial period to check your report regularly.
Don't like surprises? Find out what lenders see when they access your report BEFORE you apply for a loan. Click here for your comprehensive credit report. - If you are obtaining a loan soon, this credit report will give you insight into what lenders are looking for.
Get Your Equifax Credit Report Now! 
Pay down credit card debt
If you know you are going to be applying for a loan soon, start paying down your outstanding debt now. Use any extra money you have toward getting your balance to 30% of your credit card limit. This could save you thousands in the long run if it means you qualify for a better interest rate on a loan because your score is higher.
Don't charge 60 days before applying
Credit agencies typically run a few months behind in reporting balances, so you will need to be at 30% of your limit several months before you plan on applying for a loan. It takes a little forethought, but it can help raise your score even if it means using only cash and checks for a couple of months.
Pay in the middle of the billing cycle
Most credit card companies allow you to pay online at anytime now. The key is to lower the dollar amount before the billing cycle closes. The balance at the time of closing is what the credit card companies report, so paying before that amount is listed will lower the balance reported.
Credit scores range from 300 to 850, with anything higher than 760 being the most desirable. Even with a good score, knowing how this 30% concept works can improve your score if you are preparing to apply for a loan.