1. What Is Credit Utilization?

Credit utilization is the ratio of your outstanding credit card balances to your credit card limits. It represents the percentage of your available credit that you're currently using and is a significant factor in calculating your credit score.

2. How Does The Calculator Work?

The calculator uses the credit utilization formula:

Where:

• \( \text{Balance} \) — Current outstanding balance on your credit card ($)
• \( \text{Limit} \) — Total credit limit available on your card ($)

Explanation: This simple calculation shows what percentage of your available credit you're currently using, which is a key factor in credit scoring models.

3. Importance Of Credit Utilization

Details: Credit utilization makes up about 30% of your FICO credit score. Maintaining a low utilization rate (typically below 30%) demonstrates responsible credit management and can help improve your credit score.

4. Using The Calculator

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.

5. Frequently Asked Questions (FAQ)

Q1: What is a good credit utilization ratio?
A: Most experts recommend keeping your credit utilization below 30%. A ratio below 10% is considered excellent for maximizing your credit score.

Q2: Does credit utilization affect my credit score?
A: Yes, credit utilization is a significant factor in credit scoring models, typically accounting for about 30% of your FICO score.

Q3: Should I calculate utilization per card or overall?
A: Both are important. Credit scoring models look at both individual card utilization and your overall utilization across all cards.

Q4: How often does credit utilization update?
A: Credit utilization is typically reported to credit bureaus once per month, usually around your statement closing date.

Q5: Can paying off balances multiple times per month help?
A: Yes, making multiple payments throughout the billing cycle can help keep your reported utilization low, even if you use your card frequently.