Stay Out of Debt – Defend Your Credit

Set up automatic payments to avoid late fees, and learn the importance of credit utilization.

Lockdown Automatic PaymentsYour Utilization Ratio

Lockdown Your Automatic Payments

There are three instances in life in which you definitely don’t want to be late: job interviews, plane flights and paying your bills. Let’s talk about that last one. It might not seem like a big deal, but paying your bills late can seriously hurt your credit score and add to your debt.

This includes all bills — credit card payments, cell phones, utilities, mortgage and car payments. Fortunately, most institutions have a simple, automated way to pay on time via your phone or the internet. It’s time to turn on auto-pay.

What You Need to Set Up Auto-Pay

  • Your checking account numbers and routing numbers
  • A list of your fixed, constant monthly bills — rent, insurance, utilities, minimum credit card payments, etc.
  • The websites for the institutions you use to pay each of your monthly bills

Seriously, that’s all it takes. Now grab your bills, log into your bank account and start automating today!

We’ve collected the major banks’ websites for you.

As you continue to set up auto-pay for accounts and other bills, organize your list in a spreadsheet. This way, you can have the information in one place in case you ever need to make changes. Things to include:

  • Company name
  • Company website
  • Username
  • Related email address
  • Name of account funds are being withdrawn from
  • Auto-pay schedule (for example, the 1st of every month)

Your Utilization Ratio

Your credit utilization ratio affects your credit score. “What is my credit utilization ratio?” you may ask. Well, it’s the ratio of your current credit card balances to your credit limits, and it tells lenders how well (or poorly) you’re using your revolving debt.

“Revolving debt” is defined by payments that change from month to month, and is based on your current monthly balances. Your credit cards are an example of this. Mortgages and auto loans are considered “installment loans,” because their monthly payments stay consistent over the course of the entire loan.

Even credit cards with $0 balances affect your aggregate utilization ratio. So never close unused credit cards accounts, because lenders look at both your individual and aggregate ratios to see how well you’re using ALL of your revolving debt. Responsibly managing both will help you stay in good financial health.

Your Utilization Ratio is More Than a Number

Like getting a cute boy or girl’s phone number, but not having a phone to call them; knowing your credit utilization ratio is only useful if you can use it.

A good strategy to keep your utilization ratio low is to increase your credit limit, either by applying for new cards (not preferable) or raising your credit limit on your current card(s). As the graphic shows below, if you’re charging $1,000 a month, hopefully not entirely on knick-knacks and paddy-whacks, dividing purchases between multiple cards will keep your individual and aggregate utilization ratios low.

Spending on One Card


Credit Limit






Spending on Multiple Cards


Credit Limit


 Card 1




 Card 2




 Card 3








Lenders use your credit utilization ratio to get a better idea of your financial health and responsibility. By keeping your ratios low, you prove your responsibility and gain the lenders’ trust that you rightfully deserve. And you can lower your utilization ratio with one phone call to your credit card company asking for a higher limit (you can use the same script we have for reducing your APR).

Staying in the Ideal Ratio

Payoff Tip

Multiple monthly payments can keep your utilization ratio low.

By making smaller payments throughout the month, maybe $50 a week, you can keep your ratios low and reduce the impact on your credit score.

Take a solid look into your current finances to find your realistic credit utilization ratio. Staying below 10% is ideal, but under 30% is still good. This is a great way to show lenders you’re a low risk borrower.

Find the dollar amount for each credit card to stay under 10%.

If you stop adding to your balances and keep making your payments, you can watch as your credit utilization ratios fall and your credit score soars!

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