For individuals who have more than one credit card, the credit usage ratio often refers to the total amount of debt they owe on all of them.

Because credit usage accounts for 30% of your credit score, you should maintain your available credit as high as feasible — and your obligations as low as possible. Carrying large credit card bills boosts your credit usage ratio and might reduce your credit score.

In this blog, you will learn the credit card utilization ratio in detail.

All About Your Credit Card Utilization Ratio

Credit usage is the percentage of your overall credit to complete debt comprising credit accounts (these include credit card accounts and home equity lines of credit). If your credit usage ratio is 35%, you use 35% of the available credit. A credit usage ratio of 35% suggests that you now have a $3,500 balance on one credit card with a $10,000 credit limit.

If an individual uses several credit cards, their credit usage ratio often signifies the full amount of debt they owe on all of them. Because credit usage accounts for 30% of your credit score, you should maintain your existing credit as high as feasible — and your obligations extremely low. Carrying large credit card bills boosts your credit usage ratio and might reduce your credit score.

The second most important element influencing your credit score is your payments. If you want to form good or improve to great credit, keep your credit use ratio as low as feasible.

Most credit specialists recommend maintaining your credit use below 30%, especially if you want to keep your credit score high.

How to Drop Your Credit Utilization Ratio?

Reducing your credit usage ratio is a simple process and is an ideal way to improve your credit score. The four strategies mentioned below are for reducing debt, increasing accessible credit, and reaping the benefits of a reduced credit usage ratio:

Opening A Balance Transfer Credit Card

If monthly interest rates are making it tough to reduce your amounts, you may consider a balance transfer credit card. These cards allow you to transfer and consolidate your obligations onto a single credit card, making debt repayment easier.

Paying Off Your Debts

Paying down your credit card bills is the greatest approach to reducing your credit usage ratio. Every dollar you pay off lowers your credit usage ratio and total debt, making it a win-win situation.

Requesting An Increase in Your Credit Limit

Another effective strategy to reduce your credit usage ratio is to seek an increase in your credit limit from your credit card company. You will have more accessible credit on your account if you increase your credit limit, which will immediately reduce your credit usage percentage.

Requesting A New Credit Card

Applying for a new credit card is another effective approach to reducing your credit usage ratio. Having numerous credit cards linked to your account improves the amount of credit accessible to you, and if your overall expenditure does not rise, your credit usage percentage should decrease.

Final Verdict

Your credit card utilization ratiois one of the most common measures for determining a borrower’s creditworthiness. Using a cashback website like the Great Canadian Rebates can help you save money on purchases and allow customers to maintain good credit. Contact us for more details.