How does your credit utilization ratio affect your score?

Your credit utilization ratio is the percentage of your available revolving credit that you're currently using, and it accounts for about 30% of your FICO score, making it the second most important factor after payment history. Keeping it low signals to lenders that you're not overly dependent on credit. Generally, staying below 30% is recommended, but below 10% is even better for maximizing your score. For example, if you have a $10,000 credit limit and carry a $3,000 balance, your utilization is 30%. High utilization suggests financial stress and increases your perceived risk as a borrower. The good news is that utilization has no memory, so paying down balances can quickly improve your score within one billing cycle.