Credit Utilization Ratio?

Credit utilization ratio is the percentage of your credit limit that you're currently using. For example, if you have a credit card with a $10,000 credit limit and your balance is $2,000, your credit utilization ratio would be 20%.

Credit utilization ratio is an important factor in calculating your credit score. The lower your credit utilization ratio, the better your credit score will be. A high credit utilization ratio can indicate that you're relying too heavily on credit and may be at risk of defaulting on your payments. This can cause lenders to view you as a higher credit risk, which can result in higher interest rates and less favorable credit terms.

Most credit experts recommend keeping your credit utilization ratio below 30%. However, the lower your ratio, the better. Keeping your credit card balances low and paying off your debts on time can help you maintain a healthy credit utilization ratio and improve your credit score over time.

It's important to note that credit utilization ratio is calculated based on your credit card balances at a specific point in time. If you regularly pay off your balances in full each month, your credit utilization ratio will generally be low. However, if you carry a balance from month to month, your credit utilization ratio may be higher, which can negatively impact your credit score.