“Why Credit Untilization Matters!” By Bishop Martin Wilson
Credit utilization is one of the most significant factors that affect your credit score. It refers to the percentage of your available credit that you’re currently using. Maintaining a low credit utilization rate is crucial for keeping your credit score in good shape. In this article, we’ll explain what credit utilization is, why it’s important, and how you can manage it effectively. What is Credit Utilization? Credit utilization is the ratio of your credit card balance to your credit limit, expressed as a percentage. It is a key component of the “amounts owed” factor, which makes up 30% of your credit score. A lower utilization rate suggests to creditors that you’re managing your credit responsibly and are not overly reliant on credit. Formula to Calculate Credit Utilization: For example, if you have a credit card with a $1,000 limit and your current balance is $300, your credit utilization is 30%. Why Does Credit Utilization Matter? Credit utilization gives lenders a snapshot of how