Hi i heard you guys refer to utilization when talking about credit cards. What is it ? What is the correct percent . Please explain.
Utilization is the amount of your total balances divided by the amount of credit limit available on all of your cards. It can also be computed for each card by dividing the balance by the credit limit. There is discussion on what the right number is. At least below 50%. Below 30% is better, some think below 20%. It is figured on the balance on your statement, normally, as that is what is usually reported to the credit bureaus. This is why people get cards and use them very little or try to get limit increases--it helps the ratio. As long as you don't have too many open accounts, that is! No one really knows the true answer to how scores are computed, and therefore what the "best" utilization is.
