1. What is Credit Utilization Ratio?

The Credit Utilization Ratio (CUR) is the percentage of your available credit that you're currently using. It's a key factor in calculating your credit score, representing how much of your available credit you're using at any given time.

2. How Does the Calculator Work?

The calculator uses the Credit Utilization Ratio formula:

Where:

• \( B \) — Current credit card balance (in currency units)
• \( CL \) — Credit limit (in currency units)
• \( CUR \) — Credit Utilization Ratio (percentage)

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

3. Importance of Credit Utilization

Details: Credit utilization makes up about 30% of your FICO credit score. Keeping your utilization below 30% is generally recommended, with the best scores typically going to people with utilization under 10%.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why is credit utilization important?
A: It's a major factor in credit scoring models, showing lenders how responsibly you use credit. High utilization can signal financial stress.

Q2: What's a good credit utilization ratio?
A: Below 30% is good, under 10% is ideal. The lower your utilization, the better it is for your credit score.

Q3: How often is credit utilization calculated?
A: It's typically calculated when your credit card issuer reports to credit bureaus, usually at the end of each billing cycle.

Q4: Does utilization consider all cards or individual cards?
A: Both. Scoring models look at overall utilization across all cards and utilization on individual cards.

Q5: How can I lower my credit utilization?
A: Pay down balances, request credit limit increases, or open new credit accounts (though this may temporarily lower your score).