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Credit Utilization Formula:
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Credit utilization is the percentage of your available credit that you're currently using. It's a key factor in calculating your credit score and represents how much of your available credit you're using at any given time.
The calculator uses the credit utilization formula:
Where:
Explanation: The formula calculates what percentage of your available credit you're currently using by dividing your balance by your credit limit and multiplying by 100 to get a percentage.
Details: Credit utilization is a major factor in credit scoring models, typically accounting for about 30% of your FICO score. Maintaining a low utilization rate (generally below 30%) demonstrates responsible credit management and can help improve your credit score.
Tips: Enter your current credit card balance and credit limit in dollars. Both values must be valid (balance ≥ 0, limit > 0). The calculator will instantly compute your credit utilization percentage.
Q1: What is a good credit utilization ratio?
A: Generally, keeping your utilization below 30% is recommended. For optimal credit scores, many experts suggest keeping it below 10%.
Q2: How often is credit utilization calculated?
A: Credit utilization is typically calculated based on the balance reported to credit bureaus each month, usually your statement balance.
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: Should I pay off my balance before the statement date?
A: Paying down balances before the statement closing date can help lower your reported utilization and potentially improve your credit score.
Q5: How does multiple credit cards affect utilization?
A: Most scoring models consider both individual card utilization and overall utilization across all your credit cards.