1. What is Credit Utilization?

Credit utilization is the ratio of your credit card balances to your credit limits, expressed as a percentage. It's a major factor in calculating your credit score, accounting for about 30% of your FICO score.

2. How Does the Calculator Work?

The calculator uses the credit utilization formula:

Where:

• \( Balance \) — Current credit card balance
• \( Limit \) — Total credit limit on the card

Explanation: The calculator also provides an estimated score impact based on typical scoring models where lower utilization generally means higher scores.

3. Importance of Credit Utilization

Details: Maintaining low credit utilization (typically under 30%, ideally under 10%) demonstrates responsible credit management and can significantly improve your credit score.

4. Using the Calculator

Tips: Enter your current credit card balance and credit limit in dollars. Both values must be positive numbers, with limit greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What's a good credit utilization ratio?
A: Below 30% is generally good, but under 10% is ideal for maximizing your credit score.

Q2: Does this calculator consider all credit cards?
A: This calculates for a single card. For overall utilization, sum all balances and all limits.

Q3: How often does utilization affect my score?
A: Utilization has no memory in most scoring models - it's calculated based on current balances.

Q4: Should I pay my balance before the statement date?
A: Paying before the statement closes can lower reported utilization, potentially helping your score.

Q5: Does 0% utilization give the best score?
A: Surprisingly, no. Having very low (but not zero) utilization typically gives the best results.