On Wednesday I received this email from reader, Joshua:
Thank you for reading my email.
My question regards my credit score. I recently got my credit report and score. My score as of right now is a 577 which as you know wont get me very far. I make decent money now and I am paying off my accounts although I haven’t been delinquent since February of ’05. I know that has a negative effect on my credit. But I also noticed that what else is screwing up my credit is the fact that my amount owed is close to the maximum amount I can borrow. I basically took the money that I’m putting towards savings this paycheck and I put it all towards my credit cards along with my usual amount of credit card payments that are in my budget. My question is, how long will these payments take to get to the credit bureaus so that my score can raise? Before I made these payments I had 13.55% of my available credit left and after I made my payments I have 22.26% of my available left. So I guess I have 2 question:
1. How long will these payments take to filter into the credit bureaus?
2. What’s the ideal percentage of available credit to have left?
FICO scores are one of my weaker areas so I sent Joshua’s question to Liz Pulliam Weston, an MSN Money contributor, credit expert, and author of Easy Moneyand Your Credit Score(Affiliate Links). Here’s Liz’s response:
I’m delighted to help out.
Joshua’s score will improve as soon as his credit card companies report the new, lower balances to the credit bureaus. When will that happen? It depends on the lender, but most report once a month, so it should happen within 30 days. (If you check your credit reports, your credit cards will generally show the balance from your most recent statement.)
As to his second question: the less of your available balance you use, the better. I generally advise people to use no more than 30% of their limits at any given time, but you’ll typically continue to see score improvements until you get your credit utilization down below 10% of your limit.
Hope that helps.
Liz Pulliam Weston
Bottom line: Joshua’s on the right course and I respect the fact he is making an effort to pay deliquent accounts even though they can hurt him in the short run. Eventually his FICO score will move up.