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Credit Utilization Formula:
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Credit card utilization, also known as credit utilization ratio, is the percentage of your available credit that you're currently using. It's a key factor in calculating your credit score and represents how much of your available credit you're using at any given time.
The calculator uses the credit utilization formula:
Where:
Explanation: This simple calculation shows what percentage of your available credit you're currently using, which is a significant factor in your credit score calculation.
Details: Credit utilization makes up about 30% of your FICO credit score. Maintaining a low utilization ratio (typically below 30%) demonstrates responsible credit management and can help improve your credit score.
Tips: Enter your current credit card balance and total credit limit in dollars. Both values must be positive numbers, with the credit limit greater than zero.
Q1: What is a good credit utilization ratio?
A: Most experts recommend keeping your credit utilization below 30%. The lower your utilization, the better it is for your credit score.
Q2: How often is credit utilization calculated?
A: Credit card companies typically report your balance to credit bureaus once per month, usually on your statement closing date.
Q3: Does utilization consider all cards or individual cards?
A: Both are important. Credit scoring models look at your overall utilization across all cards as well as individual card utilization.
Q4: How can I lower my credit utilization?
A: You can lower utilization by paying down balances, requesting credit limit increases, or using multiple cards strategically.
Q5: Does a 0% utilization hurt my credit score?
A: While low utilization is good, 0% utilization may slightly lower your score as it doesn't demonstrate active credit use. A small utilization (1-9%) is often ideal.