What effect do maxed-out credit cards likely have on your credit score?

Maxed-out credit cards tend to lower your credit score due to several factors. One of the primary considerations in credit scoring models is credit utilization, which is the ratio of your current credit card balances to your total credit limits. When you max out a credit card, your credit utilization ratio skyrockets, often exceeding the recommended threshold of 30%. High utilization signals to creditors that you may be over-relying on credit and potentially struggling to manage your debts, making you a riskier borrower.

Additionally, maxing out cards can lead to missed payments if you cannot meet repayment obligations, which further negatively impacts your credit score. Therefore, maintaining lower balances and keeping credit utilization within a healthy range is crucial for a good credit score.