What is credit utilization ratio and why is it important?

What is credit utilization ratio and why is it important?

Credit utilization ratio is the percentage of your total available credit that you're currently using. It's important because it affects your credit score; a lower ratio can indicate to lenders that you're a responsible borrower.

How do I calculate my credit utilization ratio?

To calculate your credit utilization ratio, divide your total credit card balances by your total credit limits, then multiply by 100 to get a percentage.

What is considered a good credit utilization ratio?

A good credit utilization ratio is typically below 30%. Keeping it lower can positively impact your credit score.

Can I improve my credit score by lowering my credit utilization?

Yes, lowering your credit utilization can improve your credit score, as it shows lenders that you are not overly reliant on credit.

What should I do if my credit utilization is high?

If your credit utilization is high, consider paying down your balances, increasing your credit limits, or spreading out your charges across multiple cards.