1. What is Credit Utilization Ratio?

The Credit Utilization Ratio (CUR) is a key factor in credit scoring models that measures how much of your available credit you're using. It's expressed as a percentage of your total credit limit that you're currently using.

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 currently using. Lower percentages are generally better for your credit score.

3. Importance of Credit Utilization

Details: Credit utilization accounts for about 30% of your FICO score. Maintaining a ratio below 30% is generally recommended, with the best scores typically going to those with 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 (credit limit must be 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 ratio, the better it is for your credit score.

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

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: 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).