Total Debt | The FICO Score Mini-Series

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Total Debt Determines 30% of a FICO Score –

This is the third post of The FICO Score Mini-Series. If you read last week’s post you might remember that we unpacked the Payment History factor of your FICO Score. Also you may remember that Payment History determines 35% of your total FICO Score.
Read it here >> Payment History | The FICO Score Mini-Series

Last week we ended with talking about Mary’s Capital One Credit Card. If you remember, she had credit limit of $2,000 and she carried a balance of $1,900. You don’t need to know anything about FICO credit scores to know that this looks bad. But do you know why?

Today’s topic is our next key catagory, Total Debt (or amount owned). Once you look at it closely, you’ll probably agree why Total Debt is 30% of your score. Imagine a friend of yours asked to borrow money from you… let’s say $1,000. The question in the back of your mind would be:
A. Does he or she pay their debts? (payment history 35%)
B. How much does he or she still owe? (total debt 30%)

FICO has the same questions while calculating your FICO Scores; so much that they total 65% of your credit score. Wow!

How it works

Am I saying that you are a credit risk if you carry a balance on your credit accounts? No. But in Mary’s case, carrying a high balance indicates that she has overextended her finances and is less likely to meet her future credit obligations on time. This is especially true because this is Mary’s only credit card. It’s the simple principle of being trusted with little before being trusted with much. That was spoken by a very wise man!

Your FICO Scores take into account several factors for Total Debt.

  • The amount owed on all accounts (Mary has only 1 revolving account and 1 installment account)
  • The amount owned on different types of accounts (the percentage is spread out to 2 accounts)
  • Credit used/available on revolving accounts (Mary’s case is bad)
  • How many accounts have balances (both accounts carry a high balance)
  • How much of an installment loan is paid vs total amount (Mary has paid down very little)

After zooming in on Mary’s Total Debt we can see how important it is for her to pay down her Capital One Credit Card debt soon. So how much is “safe” for Mary to spend on her credit card?

30% is the sweet spot

Try to keep your credit card balance below 50% of your credit card limit. 30% is the sweet spot. So if Mary has a limit of $2,000 then 30% is $600.
[2,000 x .3 = 600]

One last tip to improve your Total Debt %

In Mary’s case, and maybe yours as well; opening a second credit card can pump her FICO score.

I get it. Your thinking that if your score is too low, you can’t get a second card. Well at least not right away. The key is to pay down some debt over the next few weeks to raise your FICO Score. Need a credit card for poor credit?
Go Here >>

After applying for a second credit card, keep a small balance on the second credit card. Doing so will spread the “total debt” factor across another low balance account, lowering the harsh effect of the first account being maxed-out.

Hope you feel smarter now 😉

Stay thirsty friends.


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