![]() It's often the second most important factor, following payment history. ![]() In many credit scoring models, your credit utilization ratio accounts for a significant portion of your total score. How your credit utilization ratio affects your credit scores Therefore, your credit utilization ratio is $750 divided by $3000, which equals 0.25, or 25%. This means your total outstanding debt is $750, and your total available credit is $3,000. Card B has a $2,000 credit limit and carries a balance of $300. Card A has a $1,000 credit limit and carries a balance of $450. Say you have two credit cards, Card A and Card B. Once you have these numbers, divide your outstanding debt by your available credit and convert this number to a percentage to get your credit utilization ratio. Next, add the credit limits of each individual account together to find your total available credit. To calculate your credit utilization ratio, tally your outstanding debt across all revolving credit accounts. How to calculate your credit utilization ratio Carrying more debt may suggest that you have trouble repaying what you borrow and could negatively impact your credit scores. Lenders typically prefer that you use no more than 30% of the total revolving credit available to you. Your credit utilization ratio is one tool that lenders use to evaluate how well you're managing your existing debts. Credit cards and home equity lines of credit (HELOCs) are two common types of revolving accounts. A revolving account offers the borrower a steady source of credit that can be used for purchases and paid back multiple times. Your credit utilization ratio, generally expressed as a percentage, represents the amount of revolving credit you're using divided by the total credit available to you. Here's everything to know about how your credit utilization ratio works and what it means for your access to credit. Whether you're in the market for a mortgage with a prime interest rate or a small business loan with the best terms, a low credit utilization ratio can help. Depending on your situation, it may also be appropriate to consider increasing your credit limits. To improve your credit utilization ratio, it's generally best to decrease your outstanding debt.Lenders use your credit utilization ratio to help determine how well you're managing your current debt.Your credit utilization ratio, generally expressed as a percentage, represents the amount of revolving credit you're using divided by the total credit available to you.
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