Definition
The percentage of your available credit you’re using. Keeping this ratio low is good for your credit score.
What to consider
- Keep your spending low relative to your available credit.
- This ratio is a quick indicator of how well you manage debt.
- Adjust your spending habits if you see the ratio creeping up.
Real world scenarios
- Marco makes mid-cycle payments on his credit cards to keep his balances low relative to his limits, benefiting his credit score.
- Nicole notices her ratio spike after holiday shopping. She pays off the excess quickly to maintain a favorable score.
- Reducing unused credit card debt helps Jason lower his utilization ratio, which boosts lender confidence.
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