Risk factors are key to improving credit scores

Dear Experian,

What’s the meaning of “proportion of revolving balances to revolving credit limits is too high?”



Dear ZHN,

It means that the total balances on your credit cards as compared to your total credit limits on those cards are having a negative affect on the credit score you received.

“Proportion of revolving balances to revolving credit limits is too high” is a common factor for credit scores because it is a key indicator of risk. A series of four or five risk factors is generated every time a credit score is calculated. The risk factors describe what from your personal credit history is most affecting the score.

By addressing the issues pointed out by the risk factors, you can improve your credit scores. The risk factors are what empower you to take action to become a better credit risk.

Keep in mind that the risk factors are relative to your complete credit history. It is possible for two people to have the same risk factor, but with very different credit scores.

In your instance, if your scores are too low, one of the things you need to do is reduce the balances on your credit cards. If your scores are quite high, they still may list the balances as a factor because there are no other negative factors.

If you have really good scores, the risk factor might represent only a few points, and making the change might result in only a small increase in the credit scores. If you have very poor credit scores, the risk factor could represent a substantial number of points, and addressing that issue could have a much greater effect on the score.

The way I think about it is that the closer you are to perfect, the harder it is to improve.

I recommend that everyone get their credit report once a year. At the same time you will be offered an opportunity to purchase a credit score for a nominal fee. The score comes with a report that explains what is impacting your credit score both positively and negatively.

Getting the credit score once a year can be a good way to see where you stand in terms of general credit worthiness and to help establish a plan to improve your creditworthiness if you have had some problems in the past.

Thanks for asking.

- The “Ask Experian” team

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