What does "credit utilization ratio" represent?

The credit utilization ratio is an important metric in personal finance that measures the percentage of available credit that is currently being used. It is calculated by dividing the total amount of credit card balances by the total credit limits across all of your credit accounts. A lower credit utilization ratio suggests responsible credit management, which can positively influence your credit score. Financial experts often recommend maintaining a utilization ratio below 30% to optimize your credit score. This ratio provides insight into how much of your available credit you are currently using and indicates your reliance on credit. Understanding and managing this ratio is crucial for maintaining healthy credit and securing better lending terms in the future.