A credit utilization ratio counts for 30% of a person's FICO credit score. After paying on time, which counts for 35%, it is the most important factor in determining your score. A credit utilization ratio is calculated by dividing a borrower's total debt balances by the total of his or her credit limits. The lower the ratio, the better. For example, if you owe $5,000 in relation to a $10,000 credit limit, your credit utilization ratio is 50%. If you owe $1,000 with a $10,000 credit limit, the ratio is only 10%.
We would like your feedback on this Personal Finance Frequently Asked Question.
