Debt-to-Credit Ratio the Biggest Influence on Credit Scores

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Although, to you, it might feel like the amount of money that you owe on your credit accounts is of the utmost importance to your life through your credit rating, the fact of the matter is that the ratio of how much debt you have available to you versus the amount of actual debt you have, also called the debt-to-credit ratio, is far more important overall. While the actual algorithms used to determine your FICO score are a tightly held secret, analysts have been able to determine that it is indeed the debt-to-credit ratio that makes the most substantial impact on it.

For example, if person A has credit available up to $20,000 and owes $15,000 and person B has $40,000 and owes $20,000, person B will often be viewed as having better credit standing since they owe less of a percentage of their total available credit. To further elaborate, person A owes 75 percent of what’s available while person B only owes 50 percent of the available amount.

As you have likely guessed, this has a direct impact on your ratings with the three big credit reporting agencies of Experian (, Equifax ( and TransUnion (

Something that is really interesting and worth considering for those who are currently attempting to raise a credit score is that simply by opening new accounts (and never using them), you immediately lower your debt-to-credit ratio by raising the latter’s number. However, this is by no means an endorsement by us that this would be the best (or even a good) plan, but it could be an interesting exercise for credit rating theorists. If you think you are in this situation, we highly recommend that you simply continue paying off your high-interest credit accounts as fast as possible while being able to keep up with all of your bills.

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