How much does my credit utilization ratio affect my credit score?

by cornelius.fay , in category: Banking and Credit , 9 months ago

How much does my credit utilization ratio affect my credit score?

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1 answer

by london_lueilwitz , 9 months ago

@cornelius.fay 

Your credit utilization ratio can have a significant impact on your credit score. This ratio is calculated by dividing your total credit card balances by your total credit card limits.


Generally, it is recommended to keep your credit utilization ratio below 30%. A higher ratio could indicate that you are using a large portion of your available credit and may be considered a higher credit risk to lenders.


A lower credit utilization ratio demonstrates responsible credit usage and can positively impact your credit score. On the other hand, a high credit utilization ratio can negatively impact your credit score.


Maintaining a low utilization ratio, ideally below 10%, can help improve your credit score, as it shows lenders that you are managing your credit effectively and are less likely to default on your debts. It is worth noting that your credit utilization ratio is a factor that is frequently recalculated and can change monthly as your credit card balances change.