Credit Utilization Ratio Formula:
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The Credit Utilization Ratio (CUR) measures how much of your available credit you're using. It's a key factor in calculating credit scores, representing the percentage of your total credit limit that's currently being used.
The calculator uses the Credit Utilization Ratio formula:
Where:
Explanation: The ratio shows what percentage of your available credit you're currently using. Lower ratios are generally better for your credit score.
Details: Credit utilization accounts for about 30% of your FICO score. Keeping your utilization below 30% is recommended, and below 10% is ideal for optimal credit scoring.
Tips: Enter your current credit card balance and total credit limit. Both values must be positive numbers, with credit limit greater than zero.
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 may indicate higher risk.
Q2: What's a good credit utilization ratio?
A: Below 30% is good, below 10% is excellent. The lower your utilization, the better it is for your credit score.
Q3: How often should I check my credit utilization?
A: Monthly, as credit card issuers typically report balances to credit bureaus once per month.
Q4: Does utilization include all credit cards?
A: Both individual card utilization and total utilization across all cards are important factors.
Q5: Can I improve my ratio without paying down debt?
A: Yes, by requesting credit limit increases (without increasing spending) or opening new credit accounts (though this may temporarily lower your score).