Credit Utilization Ratio - How to Calculate & Reduce (2024)

FAQs

Credit Utilization Ratio - How to Calculate & Reduce? ›

To find out what your credit utilization ratio is, you'll need to start by adding up the credit limits on your credit cards. After you've completed that step, add up your current credit card balances. Finally, divide the balance total by your credit limit total and multiply that number by 100.

Add up all of your revolving credit balances. Add up the credit limits of all your revolving credit accounts. Divide your total revolving credit balance (from Step 1) by your total credit limit (from Step 2). Multiply that number (from Step 3) by 100 to see your credit utilization as a percentage.

Calculating the utilization rate consists of dividing an employee's total billable hours by the total available hours. In order to express the rate in percentage form, the resulting figure should be multiplied by 100.

The best way to lower your credit utilization ratio is to pay off your credit card balances. Every dollar you pay off reduces your credit utilization ratio and your total debt, which makes it a win-win scenario.

First, add up all the outstanding balances, then add up the credit limits. Take the total balances, divide them by the total credit limit, and then multiply by 100 to find your credit utilization ratio as a percentage amount.

Billable utilization percentage can be calculated by dividing total productive hours by total available hours, then multiplied by 100. For example, if an employee's productive and billable time in a 40-hour week is 26 hours, the employee utilization rate is 65% ((26/40) x 100).

What is the 15/3 rule? The 15/3 rule, a trending credit card repayment method, suggests paying your credit card bill in two payments—both 15 days and 3 days before your payment due date. Proponents say it helps raise credit scores more quickly, but there's no real proof.

A general rule of thumb is to keep your credit utilization ratio below 30%.

To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.

How to improve utilization rate? ›

Total Billable Hours / Total Hours Available

To calculate your utilization rate of the wider firm, all you need to do is divide the total of all employee utilization rates by the total number of employees.

Make frequent payments

If you can strategize, try paying off your purchases as you make them, or at the very least make two payments towards your credit card bill a month. Doing so can help to lower your credit utilization ratio because it reduces the amount you owe.

Pay down debt

Reduce your credit card balances by paying more than the minimum each month. Consider making two or more payments on your credit cards throughout the month—even small, extra payments can speed up debt payoff and help keep your utilization ratio low throughout the billing cycle.

A general rule of thumb is to keep utilization under 30%, but lower is even better. If you're paying off your credit card in full each month anyway, try to keep your overall utilization under 10% instead. Additionally, some utilization is actually better than 0% utilization.

Your credit utilization ratio is one tool that lenders use to evaluate how well you're managing your existing debts. Lenders typically prefer that you use no more than 30% of the total revolving credit available to you.

This means you should take care not to spend more than 30% of your available credit at any given time. For instance, let's say you had a $5,000 monthly credit limit on your credit card. According to the 30% rule, you'd want to be sure you didn't spend more than $1,500 per month, or 30%.

How do you calculate capacity utilization? Capacity utilization is calculated using a formula: the rate of capacity utilization is equal to the ratio of the actual level of output over the maximum level of output multiplied by a hundred percent. That is, capacity utilization rate = actual output/optimal output.

Your credit utilization rate affects your credit score. Try to keep your overall credit use to about 30% of your overall credit limit, if not lower. Extend your overall credit availability by applying for additional lines of credit, but don't apply for too many at once.