1. What is Credit Utilization Ratio?

The Credit Utilization Ratio (CUR) is a key factor in credit scoring models that measures the amount of credit you're using compared to your total available credit. It's expressed as a percentage and is calculated by dividing your current credit card balance by your credit limit.

2. How Does the Calculator Work?

The calculator uses the Credit Utilization Ratio 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 currently 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 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 in dollars. 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 scoring models, showing lenders how responsibly you use credit. High utilization may suggest financial stress.

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 utilization?
A: Monthly, as credit card issuers typically report balances to bureaus once per month (often statement balance).

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

Q5: How can I lower my utilization ratio?
A: Pay down balances, request credit limit increases (without spending more), or open new credit accounts (sparingly).