Are you one of those people who pay off your entire credit card balance each month? Do you carry zero balances on credit cards? Do you have credit cards that you do not use? If so, you probably think that you are doing your credit score a favor, but you are not. Thirty percent of your credit score is calculated and formulated according to your debt ratio. In order to have a debt ratio, you have to have open accounts with balances on them.

Why? Lenders look at several things when you ask to borrow money. First and foremost, they make sure that you pay your bills on time. Secondly, they look to see how well you pay off debts over the course of time. You see, lenders make money from the interest payments that you make each month. They want to see that you have made regular, timely interest payments in the past. If you pay off your balances each month, you are not paying any interest.

Now before you go wild and max out your credit cards, you should know that balance is the key to maintaining a good debt ratio on your revolving credit accounts. A good debt ratio is between 10 and 25%. This means that a credit card with a $1,000 limit should only have a balance of $100 to $250.

Following are some tips to help you improve your debt ratio:

* Multiple Cards - Carrying a small balance on multiple cards is better than carrying a large balance on one or two cards. If you only have one or two credit cards, apply for another and split your balances evenly. Be careful not to make additional charges. Keep your debt ratio less than 25%.

* Open Accounts - Do not close old credit card accounts. Keep them current by charging a small amount on them every six months.

* Credit Increases - Ask for credit increases on your credit cards. This will improve your debt ratio immediately if you do not charge anymore than your current balance on your card.

* Business Accounts - Pay attention to business accounts. Credit reports do not distinguish between personal and business accounts. You can use this to your advantage by maintaining a good debt ratio on business lines of credit.

So, what should you do if your debt ratio is higher than it should be? Open up new lines of credit and distribute your debt evenly. Be careful not to tap into your new credit lines. The goal is to improve your debt ratio NOT increase your spending limits. You should view your credit increases as mere numbers on your credit report rather than money that you can spend.

If your debt ratio is still high or if you do not qualify for additional lines of credit, pay more than your minimum payment each month until you get your balances down. Continue to make consistent payments on your credit cards each month and freeze spending until your debt ratio is less than 25%.