1. What is Credit Utilization Ratio?

The Credit Utilization Ratio (CUR) measures how much of your available credit you're using. It's a key factor in credit scoring models, representing the percentage of your credit limit that's currently being used.

2. How Does the Calculator Work?

The calculator uses the credit utilization formula:

Where:

• \( B \) — Current credit card balance (currency unit)
• \( CL \) — Credit limit (currency unit)
• \( CUR \) — 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: Credit utilization accounts for about 30% of your FICO score. Lower ratios (typically below 30%) are better for your credit score, with the best scores often having utilization below 10%.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

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

Q2: Should I calculate utilization per card or overall?
A: Both matter. Credit scoring models look at both individual card utilization and your overall utilization across all cards.

Q3: When is credit utilization reported?
A: Most credit card companies report your balance to credit bureaus once per month, typically on your statement closing date.

Q4: Does paying off my balance every month help?
A: Yes, but if your balance is high when the statement closes, it may still show high utilization. Consider making payments before the statement date.

Q5: Can I improve my score by increasing my credit limit?
A: Yes, increasing your credit limit while maintaining the same balance will lower your utilization ratio, potentially improving your score.