What is credit utilization and why is it important?
An example of an AI chatbot conversation about understanding credit utilization and its impact on credit scores.
What is credit utilization and why is it important?
Credit utilization is the ratio of your current credit card balances to your credit limits. It's important because it affects your credit score.
How is credit utilization calculated?
It's calculated by dividing your total credit card balances by your total credit limits, then multiplying by 100 to get a percentage.
What is a good credit utilization ratio?
A good credit utilization ratio is typically below 30%. Lower ratios can positively impact your credit score.
What happens if my credit utilization is too high?
If your credit utilization is too high, it can lower your credit score, making it harder to get loans or credit in the future.
How can I improve my credit utilization?
You can improve it by paying down existing balances, increasing your credit limits, or spreading out your charges across multiple cards.
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