What is a Credit Utilization Ratio?

Your credit utilization ratio is the amount of revolving credit you're currently using divided by the total amount of revolving credit you have available. In other words, it's how much you currently owe divided by your credit limit. It is generally expressed as a percent. For example, if you have a total of $10,000 in credit available on two credit cards, and a balance of $5,000 on one, your credit utilization rate is 50% — you're using half of the total credit you have available. You can calculate an overall credit utilization rate as well as a rate for each of your credit accounts (called your per-card ratio).

Simply put, having a higher credit utilization ratio can drop your current scores. If you get into a position where you are unable to pay off the entire balance of a credit card, here is what we suggest: 1. Keep your utilization ratio at 30% or less (total cards & also individual credit cards) – if you cannot pay off in full every month! 2. Keeping open credit accounts that have zero balances, even if you don't intend to use them – This will keep your access to credit higher 3. Requesting a credit limit increase from a credit card issuer.

Again, we are always here to help, even after you close a loan with us! Our hope is to provide you with some simple tips in order to get your financial house in order. A higher credit score opens the door for less interest down the road.