Credit Utilization

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Transcript

When people get into trouble is the credit utilization ratio, how much you borrow versus your limit. And this is key to credit scoring. Starting out let's say you go to the grocery store and you purchase $175 in groceries, leaving a balance of $125 available to you on the account. Being that your maximum amount you can totally use is $300. Your credit utilization ratio now is at 58%. Now you go back the following week and spend another hundred dollars on groceries.

Your total credit utilization is at 92%. This will hurt your FICO score because it is above what the FICO scoring system likes to see. It has nothing to do with the dollar amount you have borrowed, but it has everything to do with your credit utilization ratio. If it is above 15% you will start to see your score drop

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