Credit utilization is an important part of your credit score, and monitoring it closely is key to a healthy credit score.
The credit utilization ratio, also known as the credit utilization rate, is the ratio of your current revolving credit balances divided by your revolving credit limit. To put it simply, if you have $50,000 in credit allocated, and you are using $3,000 of that credit, your utilization rate is 6%.
The higher your credit utilization ratio is, the more your credit score may be impacted, as your credit balances make up 30% of your credit score. Managing this is simple — be sure to balance your spending based on how much credit is given to you by your credit card issuer.