The ratio of credit card balances to total credit limits; ideally kept below 30%.
Credit utilization is the percentage of your available credit that you're currently using. It's calculated by dividing your total credit card balances by your total credit card limits. For example, if you have $5,000 in balances across cards with a combined $20,000 limit, your utilization is 25%. Credit utilization accounts for 30% of your FICO score, making it highly influential. Experts recommend keeping utilization below 30% to maintain a strong credit score; below 10% is even better. High utilization (above 30%) signals financial stress to lenders and can significantly hurt your score. You can improve utilization by requesting credit limit increases (which increases your denominator) or paying down balances. Importantly, utilization is usually reported monthly, so paying your statement balance in full every month is ideal.