What is credit utilization?
Credit utilization measures how much you are spending of your available credit limit from all cards combined.
For example, assume you have three different credit cards, with individual credit limits of $1,000, $4,000 and $5,000. Your total available credit will be the sum of these credit limits: $10,000.
Let's say your current balances on these three cards are $350, $500, and $150. Your total outstanding balance is the sum of these: $1,000.
You can determine your credit utilization by dividing your total outstanding balance by your total available credit. In our example, your credit utilization would be $1,000 divided by $10,000; or in other words, 10%.
