What is credit utilization ratio?
Your credit utilization ratio is an important credit score factor. As you lower your credit utilization rate, it will help your credit score.
Credit utilization basics
Your credit utilization ratio is a percentage of how much credit you’re using compared to your total credit limit. It’s an important credit score factor, so knowing how to calculate and monitor it is useful to build and maintain a good credit score.
Your credit score, which is a snapshot of your credit health, is based on certain information in your credit report. To create a credit score, credit scoring models look at relevant information in your credit report and place them into factors. Not all credit scoring models are the same, but factors generally overlap. Factors don’t all have the same influence on your credit score — some factors are more important than others. For example, your payment history and credit utilization ratio are two important factors.
In Q2 2023, bankcard balances reached a new record high of $963 billion. Gen Z consumers are acutely impacted — card balances rose over 50% from Q2 2022 to Q3 2022.
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