How credit cards impact your credit score!
What Is the Maxed-Out Credit Card Penalty?
- A single credit card over 80% usage is considered maxed out, which can cause your credit score to drop 80+ points.
- Even a card with a $300 limit and a $240 balance is considered 80% maxed out.
- Carrying zero balance and keeping the card on autopay is the easy way to avoid this penalty.
This Penalty Can Go Away Fast
- Carrying zero balance and keeping the card on autopay is the easy way to avoid this penalty.
- Paying the card down 20% can make most of the penalty go away fast — e.g. a card with a $300 limit and a $290 balance can regain about 75% of the points by paying $150 on it.
- If you have a large balance in the thousands of dollars, schedule a 1-on-1 with your Rental Kharma mentor to discuss a plan.
Maxing Out More Than One Card
- Yes, this can compound the penalty and depress your score even more.
- You're better off having 1 card with a higher limit than many cards with low limits — this can prevent multiple penalties for what is the same life event.