1. What is Credit Utilization?

Credit Utilization (CU) is a key factor in credit scoring models that measures the percentage of your available credit that you're currently using. It's calculated by dividing your total credit card balances by your total credit limits.

2. How Does the Calculator Work?

The calculator uses the Credit Utilization formula:

Where:

• \( B \) — Current balance ($)
• \( TL \) — Total credit limit ($)

Explanation: This formula calculates the percentage of your available credit that you're currently using, which is a significant factor in your credit score calculation.

3. Importance of Credit Utilization

Details: Credit utilization accounts for about 30% of your FICO 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 total limit being greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good credit utilization ratio?
A: Generally, keeping your credit utilization below 30% is recommended for maintaining good credit health. Lower ratios (below 10%) are even better for maximizing your credit score.

Q2: How often should I check my credit utilization?
A: It's good practice to monitor your credit utilization monthly, as credit card companies typically report balances to credit bureaus once a month.

Q3: Does credit utilization affect all credit scores equally?
A: While utilization is important across all major scoring models, the exact impact may vary slightly between FICO and VantageScore models.

Q4: Can I improve my credit utilization quickly?
A: Yes, by paying down balances or requesting credit limit increases (without increasing spending), you can quickly improve your utilization ratio.

Q5: Is utilization calculated per card or overall?
A: Both individual card utilization and overall utilization are important. High utilization on any single card can negatively impact your score, even if your overall utilization is low.