Credit Utilization Explained: Why It Matters in 2025
Credit Utilization Explained: Why It Matters in 2025 Credit utilization is one of the most critical yet often misunderstood aspects of your credit score. Whether you're in the USA or Australia , understanding this metric can help you take control of your financial reputation in 2025. 🔍 What Is Credit Utilization? Credit utilization refers to the amount of revolving credit you are using compared to your total credit limit. It’s usually expressed as a percentage. Formula: Credit Utilization = (Current Balance / Total Credit Limit) x 100% 📊 Why Is It So Important? It accounts for up to 30% of your credit score . High utilization suggests potential financial stress. Keeping it low shows lenders you manage credit responsibly. ✅ How to Keep Your Utilization Low Aim to use less than 30% of your total credit limit. Make payments before the statement closing date. Request credit limit increases (but don’t overspend). Pay more than the minimum each mo...