Credit Utilization Ratio

Definition

The credit utilization ratio is the amount of revolving credit you're currently using divided by the total amount of revolving credit you have available. It's a significant factor in calculating your credit score, and a lower ratio is generally better.

Example

You have two credit cards, one with a $7,000 limit and a $2,000 balance, and another with a $3,000 limit and a $500 balance. Your total available credit is $10,000 and your total balance is $2,500. Your credit utilization is 25%.