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, accounting for about 30% of your FICO score.

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 percentage of your available credit you're using at any given time.

3. Importance of Credit Utilization

Details: Maintaining a low credit utilization ratio (typically below 30%) demonstrates responsible credit management and can help improve your credit score. High utilization may indicate higher risk to lenders.

4. Using the Calculator

Tips: Enter your current credit card balance and total credit limit. The calculator will show your utilization percentage. Regular monitoring can help you manage your credit health.

5. Frequently Asked Questions (FAQ)

Q1: What is a good credit utilization ratio?
A: Generally, below 30% is good, but for optimal scores, aim for below 10%. The lower your utilization, the better it is for your credit score.

Q2: Does this include all my credit cards?
A: You should calculate both per-card and overall utilization. Lenders look at both individual card utilization and your total credit utilization across all cards.

Q3: How often should I check my credit utilization?
A: Ideally monthly, as credit card issuers typically report balances to credit bureaus once per month.

Q4: Does paying off my balance immediately help?
A: Yes, paying down balances before the statement closing date can lower your reported utilization since that's when most issuers report to credit bureaus.

Q5: Can increasing my credit limit help my score?
A: Yes, if you maintain the same spending level, increasing your credit limit will lower your utilization ratio, potentially improving your score.