Why does higher credit utilization decrease your credit score?

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.