How to Calculate It
Divide your credit card balance by your credit limit. If you have a $500 balance on a $2,000 limit, your utilization is 25%.
Example: $500 balance divided by $2,000 limit equals 0.25, or 25% utilization.
Why It Matters
Lower utilization usually looks better to scoring models because it suggests you are not relying heavily on available credit.
High utilization can affect scores even if every payment is on time.
Simple Ways to Lower It
- Pay down card balances.
- Make payments before the statement closes.
- Avoid adding new charges while lowering utilization.
- Keep old cards open when it makes sense and fees are not a problem.