What is a Credit Utilization Rate and How Does it Affect Credit?

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.

What is Credit Utilization?

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.

What is Revolving Credit?

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.

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

If you have multiple credit cards, you have per-card utilization rates and an overall utilization rate. Your per-card rate and total utilization rate both affect your credit score.

What’s a Credit Utilization Ratio?

Your credit utilization ratio is the percentage of your available credit you’re using. People also refer to it as a utilization rate. If you use a significant amount of your available credit, you have a high credit utilization ratio.

SWIPE UP FOR MORE ABOUT What is a Credit Utilization Rate and How Does it Affect Credit?