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What is a Good Credit Utilization Ratio?

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Your credit utilization - which is the amount of your credit card balance compared to the credit limit - affects 30% of your credit score. Using less of your credit gives you a lower credit utilization and is best for your credit score. You can calculate your credit utilization by dividing your credit card balance by the credit limit, then multiply that number by 100 (or simply move the decimal two places to the right) to get a percentage.

The best credit utilization is 0% - that means you're not using any of your available credit. However, if you use your credit cards at all, chances are, your credit report won't reflect a zero balance. A credit utilization ratio less than 30% is still good for your credit score. That means keeping your balances below 30% of the credit limit if you carry a credit card balance. Anything above 30% can hurt your credit score.

There are two ways to lower a high credit utilization. The first is to reduce your credit card balances. Pay as much as you can toward your credit card to reduce your credit utilization quickly. The second way is to have your credit card issuer increase your credit limit, which may not be easy, depending on your income, credit history, and time since your last credit limit increase.

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