Posted in Finance, Accounting and Economics Terms, Total Reads: 227
Definition: Credit Utilization Rate
Credit utilization rate is the rate of the existing credit that an individual has used during the period of time. It constitutes a major portion in the calculation of the credit value. A low utilization will decrease your risk and increase your credit score & vice versa.
Credit utilization ratio = (10000+15000+25000+40000)/ (50000*4)= 45%
As the total amount of debt and amount of credit is taken into account, shifting balance amount from one card to another will not change the credit utilization ratio because total outstanding debt remains the same.