1. What is Credit Utilization Ratio?

The Credit Utilization Ratio (CUR) is a key factor in calculating credit scores, representing the percentage of available credit that you're currently using. It's calculated by dividing your current credit card balance by your credit limit and multiplying by 100.

2. How Does the Calculator Work?

The calculator uses the Credit Utilization Ratio formula:

Where:

• \( B \) — Current credit card balance ($)
• \( CL \) — Credit limit ($)
• \( CUR \) — Credit utilization ratio (%)

Explanation: The ratio shows what portion of your available credit you're using. Lower ratios are better for your credit score.

3. Importance of Credit Utilization

Details: Credit utilization accounts for about 30% of your FICO score. Experts recommend keeping your ratio below 30%, with the best scores going to those under 10%.

4. Using the Calculator

Tips: Enter your current credit card balance and total credit limit in dollars. Both values must be positive numbers (credit limit must be greater than 0).

5. Frequently Asked Questions (FAQ)

Q1: Why is credit utilization important?
A: It's the second most important factor in credit scoring (after payment history), showing lenders how responsibly you use credit.

Q2: What's an ideal credit utilization ratio?
A: Below 30% is good, but for optimal scores, aim for under 10%. The lower the better, as long as you're using some credit.

Q3: How often does credit utilization update?
A: It updates whenever your credit card issuer reports to credit bureaus, typically once per billing cycle.

Q4: Does utilization include all cards?
A: Both individual card utilization and overall utilization across all cards matter for your credit score.

Q5: Can I improve my ratio quickly?
A: Yes, by paying down balances or requesting credit limit increases (without increasing spending).