Description

Credit utilization is the percentage of your available credit that you are using. It is calculated by dividing the total amount of debt you owe by your total credit limit. For example, if you have a credit card with a $1,000 limit and you owe $500, your credit utilization would be 50%.

Credit utilization is one of the most important factors in your credit score. Lenders want to see that you are not using too much of your available credit, as this indicates that you may be overextended. A good credit utilization ratio is 30% or less.

There are a few things you can do to keep your credit utilization low:

• Pay off your credit card balances in full each month.
• If you cannot pay off your credit card balances in full, make sure to make at least the minimum payment each month.
• Do not open new credit accounts unless you need them.
• Increase your credit limit. This will lower your credit utilization ratio, even if you do not use the additional credit.

By following these tips, you can keep your credit utilization low and improve your credit score.

Here are some additional things to keep in mind about credit utilization:

• It is calculated based on all of your revolving credit accounts, such as credit cards and lines of credit.
• It is not calculated based on installment loans, such as car loans and mortgages.
• It is a snapshot of your credit usage at a particular point in time.
• It can fluctuate from month to month, depending on your spending habits.

If you are concerned about your credit utilization, you can get a free copy of your credit report from each of the three major credit bureaus once a year at AnnualCreditReport.com. This will show you your current credit utilization ratio and how it has changed over time.