Why does higher credit utilization decrease your credit score?

Home (Live) Forums Credit Reports & Scores Why does higher credit utilization decrease your credit score?

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • #9254
    StellarFi
    Keymaster
    #9275
    Team StellarFi
    Moderator

    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.

Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.

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.

Build credit with every bill you pay.

With StellarFi, your bills are paid on time and reported to TransUnion®, Experian®, and Equifax®.

Credit score increase based on StellarFi member data. Credit score increase not guaranteed. On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score.

Get Free Credit Score 2

Related questions

Home (Live) Forums Credit Reports & Scores Credit Reports & Scores

Viewing 15 topics - 1 through 15 (of 223 total)
Viewing 15 topics - 1 through 15 (of 223 total)
  • You must be logged in to create new topics.