What Is Credit Utilization and Why Does It Matter?

These techniques might help you use your credit cards less frequently, perhaps saving you money and raising your credit score.

Your credit limit and your current balance are the two numbers used to calculate your credit utilization rate, which determines what percentage of your credit limit you are currently using.

Your credit utilization rate, for instance, would be 50% if you had a credit card account with a $10,000 limit and a $5,000 load.

The less you use of credit, the more appealing you are to lenders. Leslie Tayne, an attorney who specializes in debt relief and is the founder and managing director of Tayne Law Group, says that a low credit utilization rate shows creditors that you are responsible with your credit.

Your credit score might be impacted by a high credit utilization rate.

While determining your credit score, credit scoring models like FICO and VantageScore look at your debt-to-limit ratio. Credit utilization makes up 30% of your credit score using FICO scoring algorithms. So, your credit score could rise if you reduce your credit card usage.

Previous Post Next Post

نموذج الاتصال