Definition
Credit utilization is the percentage of available credit you're using across all accounts. Lenders prefer you stay below 30%—using more signals financial stress. Keeping balances low while maintaining available credit helps build stronger scores.
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Credit utilization is 30% of a FICO score and significantly affects creditworthiness. Lenders prefer utilization below 30%; using more than 30% of available credit signals financial stress. Keeping balances low while maintaining available credit helps build stronger credit scores.
Pro Tip
Lower your credit card balances or request credit limit increases to improve utilization ratio and boost your credit score before applying.
Example
A borrower has $10,000 in available credit across credit cards with $2,500 in balances; their utilization is 25%, which is healthy.