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How much of your available credit should you use?

As you probably have noticed, the cost of many essential items has skyrocketed. Indeed, according to the World Economic Forum, you are paying an average of 7.1% more for goods than you were just a couple of years ago. This fact might leave you with little choice but to reach for your credit cards.

Having too much debt can be disheartening, especially if you cannot make the minimum payments on your credit cards. You might not realize, though, that too much credit card debt also can destroy your credit score. So, how much of your available credit should you use?

Your credit utilization ratio

Your CUR compares the credit you have used to the credit you have available. To calculate the ratio, you simply divide your credit card balance by your credit limit. According to reporting from CNBC, your utilization ratio should stay below 30%.

The consequences of having a high utilization ratio

If your CUR is higher than 30%, you might see a significant decline in your credit score. Because banks and other financial institutions look at your credit score when making lending decisions, an oversized utilization ratio can complicate your life. Indeed, it may be challenging to obtain new credit cards, car loans or mortgages.

Your financial options

Deciding to get your CUR under control can be good for your financial well-being, and you have a couple of options for doing so. Ultimately, in addition to paying down your credit card balances, you can consider filing for bankruptcy or taking advantage of other debt-relief solutions.


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