What is Credit Utilization?

Credit scoring models base 30% of your credit score on your overall credit utilization rate. This piece will explain a credit utilization rate, how to calculate your credit utilization, what credit utilization ratio is best for earning a high credit score, and more.

Credit utilization refers to how much of your available revolving credit limits you use at a time. You might have one credit card or several lines of credit. You can look at your credit utilization per card as well as your overall utilization. Your credit utilization ratio affects your credit score.  

What is Credit Utilization?

Revolving credit means your credit automatically renews when you pay off your debts. You have a credit limit, which represents the maximum you can spend.

What is Revolving Credit?

In general, you want low credit card utilization. However, spending nothing on one card and having a very high utilization score on another doesn’t appeal to lenders, even if your total utilization is low.

How Does Credit Utilization Work Per-Card vs. Total Utilization?

Your credit utilization ratio is the percentage of your available credit you’re using. People also refer to it as a utilization rate.

What’s a Credit Utilization Ratio?

To calculate your total utilization rate, you take your total credit card spending (add Card A’s balance with Card B’s balance) and divide it by your total credit limit (add Card A’s limit with Card B’s limit).

How is Credit Utilization Calculated?

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