What is the credit utilization ratio?

  • Your credit utilization ratio is the percentage of your credit limits that you are using.
  • Your credit utilization ratio is part of the “amounts owed” category, which determines approximately 30% of your FICO Score.
  • Maintaining a lower utilization ratio is best for your credit scores.
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Credit scores consider a variety of information on your credit report to determine your score. An important qualifying factor is your credit utilization ratio, which is a comparison of your revolving account balances and credit limits as they appear on your credit report.

Having a lot of debt can lead to a high utilization rate, which can affect your scores. But your utilization rate is also one of the few important scoring factors that you can quickly change to improve your credit score.

What is the credit utilization ratio?

Your revolving account’s credit utilization ratio is your balance divided by your credit limit, which tells you how much of your available credit you’re using. Credit scoring algorithms consider utilization rates to be an important factor because high utilization has been shown to correlate with a higher risk of someone missing a payment in the future.

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