Credit Utilization Tips to Rebuild Your Credit Score

Learn about the importance of credit utilization in just two minutes or less. Check out the full blog post below to learn more about the following factors of credit utilization: what a credit utilization ratio is, how to calculate credit utilization, and how to lower your credit utilization ratio.

Credit utilization is really important for your credit score. In fact, as much as 30% of your credit score may be based on your credit utilization. Credit utilization ratios show how much of your available credit you’re using. And less is best. We'll use tomato soup to demonstrate.

Let’s say this bowl is your credit card — that’s called revolving credit — and all of the space in it is your credit card limit. The soup is your credit card balance. Right now, you’re using 50%. That’s your credit utilization ratio. That’s not bad, but the general rule of thumb is to aim for less than 30% utilization.

However, no matter what your utilization ratio is, if you lower it by just 10 or 20%, you may see a credit score increase. It’s even better if you happen to have a couple of accounts, each with a low balance. Look at how much more unused credit you have. That’s good! Credit scoring agencies will add these all up – and the lower your overall ratio, the higher your credit score.

Here’s some food for thought: only your latest credit utilization ratio is used. So once you improve it, past utilization doesn’t count against you. Improve this factor and you should see a boost in your score.

If you’re ready for more expert tips on rebuilding credit, check the full article on the RISE blog and get yourself on the road to better credit.

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