Chances are that you have never heard what the 30 percent rule is.  However, this simple rule has a major (and we mean major) effect on your credit score.  Which, since you read this blog all the time, you know affects your interest rate and home loan.
So what is the 30 percent rule?
Simply put, you shouldn’t use more than 30 percent of your available credit on any given credit card.  Your available credit is the money that a credit company has authorized you to spend, normally referred to as your credit limit.  So on a $6,000 credit card, you shouldn’t have a balance higher than $1,800.
When you use 30 percent of less of your credit limit, you are seen by the three major credit repositories, Trans Union, Equifax, and Experian, as very responsible.  However, if you start using 50, 60 or even 75% of your credit limit, lenders think the exact opposite.  Having a high ratio of credit availability to debt makes it appear that you are living above your means and that doesn’t make you look like a reliable consumer.  And you definitely want to look like a reliable borrower, right?
How much of an impact does it really make?
Of course. every credit score is unique, but getting your credit debt to credit limit ratio under that magic 30 percent number can have a major effect.  We’ve seen people increase their credit score by up to 100 points.  That can be the difference between getting declined or approved. 50 more points can mean a lower interest rate and that means a lower mortgage payment.
So how do I figure out my golden number?
To figure out what you can spend while following the 30 percent rule, use the following formula.  Determine your credit limit, which will appear on every statement you receive.  Take that number and multiply it by .30.  This number is your new “credit limit.”  It’s that easy!
Have more questions?
You’re in luck, The Denman Tam happens to be credit experts.  Mortgage 101 helps home buyers and those who refinance to understand credit, closing costs, points, and much more.  Plus, 101 is one-to-one, so you can ask any question you want no matter how small or basic.
To set up Mortgage 101 for yourself and to find out more cool tips like the 30 percent rule, call 402-884-5605 or email