How much you owe makes up 30 percent of your score, so this is another biggie. The credit scoring formula looks at two types of debt: installment, which covers debts like a mortgage and a car loan; and revolving, which pretty much means credit cards. Having both kinds is actually good for your score, but having too much revolving debt will burn you. If you have a choice between paying down your car loan or a credit card balance, it’s better for your score to pay the card balance, says Barry Paperno, consumer operations manager at MyFICO.com.
The portion of your available credit that has been used up is called your credit utilization ratio. “The recommended percentage of utilization is 25 percent or less,” Paperno says. Even if you pay in full every month, “you really don’t want to charge more than 25 percent of your limit,” he suggests, because the scoring formula can only see the debt, not your intention to pay it off at the end of the month. The 25 percent rule of thumb holds true both for individual cards and in the aggregate. Having a lot of retail-branded credit cards can get you in trouble here, since they typically have low limits.