1. What is Credit Utilization Ratio?

The Credit Utilization Ratio (CUR) is a key factor in credit scoring models that measures how much of your available credit you're using. It's expressed as a percentage of your current balance relative to your credit limit.

2. How Does the Calculator Work?

The calculator uses the credit utilization formula:

Where:

• \( B \) — Current credit card balance (in dollars)
• \( CL \) — Credit limit (in dollars)
• \( CUR \) — Credit utilization ratio (percentage)

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

3. Importance of Credit Utilization

Details: Credit utilization accounts for about 30% of your FICO score. Maintaining a ratio below 30% is recommended, and below 10% is ideal for optimal credit scoring.

4. Using the Calculator

Tips: Enter your current credit card balance and total credit limit. Both values must be positive numbers, with credit limit greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: Why is credit utilization important?
A: It's a major factor in credit scores, showing lenders how responsibly you manage your available credit.

Q2: What's a good credit utilization ratio?
A: Below 30% is good, below 10% is excellent. The lower the better, as long as you're using some credit.

Q3: Should I pay my balance before the statement date?
A: Yes, paying before the statement date can lower your reported utilization since most cards report the statement balance.

Q4: Does utilization have memory in credit scoring?
A: No, utilization has no memory - your score can improve immediately when you lower your utilization.

Q5: Should I close unused credit cards?
A: Generally no, as this reduces your total available credit and may increase your utilization ratio.