Why does higher credit utilization decrease your credit score?

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  • July 14, 2023 at 8:22 am #9254
    StellarFi
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    July 14, 2023 at 8:33 am #9275
    Team StellarFi
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    Credit utilization ratio is the amount of credit you are currently using in proporation to the total credit limit available. In other words, it is your total debt compared to the total credit limit or lines that are active. Your credit utilization ratio makes up 30% of your FICO® score. VantageScore® considers your credit utilization as extremely influential in determining your credit score. By keeping your credit utilization ratio low, you show that you are not overly reliant on credit and have better control over your finances. A lower credit utilization ratio indicates that you are using credit responsibly and have a lower risk of defaulting on payments.

    It is generally advised to keep your credit utilization ratio as low as possible. A maximum credit utilization of 30% is generally advised by experts.

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StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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Credit score increase based on StellarFi members’ data. Credit score increase not guaranteed. Credit scores will only be available to members whom we are able to validate. On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score. Failure to make monthly minimum payments by the due date each month may result in delinquent reporting to credit bureaus, which may negatively impact your credit score..