Credit Utilization Ratio
Definition
The percentage of your available credit you're using. If you have a $10,000 credit limit and $3,000 balance, your utilization is 30%. The lower your utilization, the better for your credit score. Keeping it under 30% is ideal.
Why It Matters
Credit utilization is 30% of your credit score. Paying down balances even if you pay in full helps your score. Using 90% of your limit signals financial stress to lenders, even if you pay on time.
Example
Two people with perfect payment history. One has $5,000 on a $20,000 limit (25% utilization), another has $16,000 on a $20,000 limit (80% utilization). The first has a higher credit score because utilization is lower.
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Pulsafi definitions are sourced from primary regulatory and industry references. See our methodology and data sources.