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How the Amount of Debt You Have Affects Your Credit Score

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If I said it once, I’ve said it a thousand times; credit card debt isn’t the enemy, your spending habits are.

Your credit utilization rate is the second highest factor in your total credit score calculation. It accounts for 30 percent of your total score. It’s only second to your payment history which is a whopping 35 percent of your total score. Knowing this, the two most important factors to keep your credit healthy is avoid overuse on your credit cards and to pay your bills on time.

Do I overuse my credit cards?

Your total amount of credit card debt should always be under 30 percent utilization. What does this look like? If your credit limit on your credit card is $1,000, your credit balance should never go over $300. Going over 30 percent utilization can have serious implications on your credit score. How much? From a personal experience, my credit score dropped over 30 points. I was at 32% utilization because of an emergency and when I was able to pay it down to 28 percent, my score was restored and went up 32 points.

If you’re in debt up to your eyeballs, it could affect more than just peace of mind and your credit score. It could actually cost you more money. Creditors may not lend to you if you’re consistently nearing your limit on your credit cards. You’re considered high-risk because you’re spending more than you make. If a creditor does lend money to you, you might be saddled with a high interest rate on you credit account.

How can I fix it?

Overuse of credit accounts is part of a larger problem than 30-ish points on your credit score. It’s a symptom of poor spending habits, which can be costly and frustrating as time goes on. Building debt has never served anyone. It’s imperative to start building healthy spending habits if you’ve noticed that you’re consistently going over 30 percent utilization.

The first thing you should do is pay down your debt to under 30 percent utilization. Make a plan, put together a budget, and stick to it. Make the distinction between wants versus needs.

Once your debt is under 30 percent utilization, make sure not to go over 30 percent. While it might be uncomfortable to change your spending habits, the long-term effects will give you more peace of mind, a higher credit score, and the ability to secure a healthier financial future.

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Bitcoin

Bitcoin Breaks $37,000, Why Downtrend To $29,000 Is Likely

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Bear with red arrow threatening man with piggybank

Bitcoin has now broken down past $38,000 for the first time in over four months. This is a crucial point for the digital asset given that it has successfully maintained its position above this level throughout all of the crashes and dips of the previous month. While most would like to think that this is only a temporary setback that will soon be resolved, analyst Nicholas Merten has warned investors to brace for even more volatility.

Prepare For Further Downside

In a recent video on his YouTube channel, Merten shared with his over 87K subscribers some gloomy analysis surrounding bitcoin. The analyst starts out by acknowledging what most have experienced in the market, believing that the recent rebound was a telltale sign of more upside to come. However, this could not have been more wrong as the digital asset has suffered even more dips following that.

Related Reading | Bitcoin Implied Volatility Plummets To Pre-Bull Market Levels: What This Means

Merten pointed out the fact that the gains realized from when bitcoin jumped from $41k to $44k have quickly faded and that there is not a lot of significant support ranges as the digital asset makes its way down with the downtrend.

He predicts some major volatility that will drag the price down to levels not seen in about a year. Comparing the market to that of May 2020, which would see the price fall to the $29,000 range. “It’s just likely at this point that we repeat what we saw back in May to some degree,” he said. “Having a correction down to this range [$29,000 to $30,000], getting people towards what I would define as max pain It basically defines the point of peak fear when everyone, even the bulls are convinced that we’re in a bear market.”

The analysts expect more downside to the tune of 20% to 30%, which would put the price of bitcoin at the range he predicts.

BTC crumbles below $37k for first time in four months | Source: BTCUSD on TradingView.com

Still Bullish On Bitcoin

The fact that Merten relayed such a gloomy diagnosis for bitcoin in the short term does not mean that the analyst is particularly bearish in the long term. He explained that despite the market showing bearish trends, he remains a bitcoin bull.

“We’ve been bearish in the short term over the past couple of weeks and we believe that there is still more downside to go, [but] I’m still a long-term bull.”

Related Reading | I Only Hold 1 Bitcoin, Real Vision CEO Raoul Pal Reveals

Additionally, Merten reiterates the fact that the market is still in a bull trend. Usually when prices start declining as fast as they are now, panic spreads across the space as most believe the bull market is over. For Mertern, this is not the case. He explains that just as a downward correction is likely, bitcoin could very well switch up and head towards the $150K to $200K range.

“I believe that we’re still in a bull market, not a bear market. It’s very likely that we could see this correction, but at the same time, it could be the catalyst to finally set ourselves up on the next uptrend and charter towards the $150k range, $200k range for Bitcoin.”

At the time of writing, bitcoin’s price is down 9.61% to be trading at $37,945.

Featured image from Medium, chart from TradingView.com
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Bitcoin (BTC) Price Fumbles, Loses 10.32% in Last 24 Hours!

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Bitcoin (BTC) Price Fumbles, Loses 10.32% in Last 24 Hours!