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Your credit utilization rate, also known as your debt-to-credit ratio, is an important factor that helps determine your credit score.Read more about Credit card balance utilization at https://nayanmahorr.blogspot.com/2022/08/how-much-of-the-credit-card-balance-should-i-use.html
Shown as a percentage, it represents how much credit you use compared to how much you have available to you.
Before approving your credit application, lenders and creditors also look at your utilization rate to determine how much of a risk you are. A high utilization indicates that you could be a subprime borrower who may have trouble paying back a loan or credit card bill because you already have a lot of debt, whereas a low utilization rate illustrates you’re able to manage credit responsibly.
No matter where your credit utilization rate stacks up against the average, know that the magic to a healthy utilization ratio is maintaining a low credit card balance and a high credit limit. The closer you can get to having a single-digit utilization, the better. Prioritize paying down your balances and once you’ve made a dent in your debt, you could consider asking for a credit limit increase.