Credit utilization refers to the ratio of the amount of credit you are currently using compared to your total available credit. It is a significant factor in your credit score, accounting for approximately 30% of it. Generally, the lower your credit utilization, the better it is for your credit score.
Ideal Credit Utilization Rate
Financial institutions typically prefer to see a credit utilization rate of less than 30%. Keeping your utilization low indicates to lenders that you are managing your credit responsibly and are less likely to default on payments.
Importance of Managing Credit Utilization
Maintaining a low credit utilization ratio can positively impact your credit score and improve your chances of getting approved for loans or credit cards with favorable terms. To learn more about managing and optimizing your credit utilization, check out our blog!