What is a credit utilization ratio and why does it matter?

Your credit utilization ratio is the percentage of your available revolving credit that you're currently using. For example, if you have a credit card with a $10,000 limit and carry a $3,000 balance, your utilization ratio is 30%. It matters because it's one of the most influential factors in your credit score, typically accounting for about 30% of your FICO score. Lenders view high utilization as a sign of financial stress or over-reliance on credit. Most financial experts recommend keeping your ratio below 30%, and ideally below 10% for the best scores. Paying down balances or requesting higher credit limits are the fastest ways to improve this ratio and boost your credit score relatively quickly.