There have been a number of posts that have asked this, both on this sub and others, and no one seems to provide any satisfactory or in depth explanation.
I see the words “statement date” and “ratio of use” thrown around with no follow up explanation as to what they mean.
So, what is it? And why does it have such a big impact on credit score (supposedly 30%)?
In: Economics
When you have a line of credit (for the vast majority of people that just means having a credit card) there’s a max amount (usually called a credit limit) of that you can use at one time without having to pay it off again.
Your utilization is the % of that that you have used without paying.
So if you credit limit of $10,000 and have spent $1000 on your credit card and haven’t paid that off yet your utilization is 10%.
That’s really all there is to it.
It has a big impact and your credit score because people that max out their cards a lot tend to me more likely to miss payments and be unsafe people to lend money to. It shows a sense of self control if you *could* spend $10,000 on random crap you don’t need and cant afford but *don’t*.
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