What is Credit Utilization?

What is credit utilization?

Credit Utilization is simply the balance owed of your total credit limit. It is typically referred to as a percentage. e.g. if your total credit limit was $10,000 and you owed $5,000 your credit utilization would be 50%.

The credit utilization is an important factor that affects your credit score. Having a high credit utilization percentage e.g. 50%, 60% or more is going to lower your credit score.  When calculating your credit score, the credit utilization percentage is look at for each credit card individually and by combining all of the credit card balances and limits together for a total percentage.

By reducing the balance/s on your credit card/s the credit utilization will be reduced and over time this will improve your credit score.