Description of image

Question 16

Credit utilization is often mentioned as one of the most important factors in credit scoring, but let’s dive deeper. Utilization measures how much of your available credit you’re using at a given time, both per card and overall. For example, if you have three cards with a combined $15,000 limit and $3,000 total balance, your utilization is 20%. While keeping utilization below 30% is the common guideline, those with top scores usually stay closer to 10%. High utilization can signal risk to lenders, even if you’re making payments on time. Interestingly, your utilization is often reported at the statement closing date — not after your payment. This means making an early payment before the statement cuts can lower reported utilization and boost your score.

Why is credit utilization considered such a key factor in credit scoring?

Did You Also Know...

By Wise Wallet

John D. Rockefeller is widely regarded as America’s first confirmed billionaire, reaching that status in the 1910s.