This post was contributed by our Financial Literacy Movement partner Quizzle.com.
The credit utilization ratio is one of the most misunderstood and often totally unknown concepts in credit scoring. However, it plays a very significant role in your credit score as it related to how you manage debt.
The simplest explanation is that credit utilization is the ratio between the credit you are using (credit balance) and the credit you have available (credit limit). The lower your credit utilization ratio, the more positively your credit will be scored.
Grab your credit report, a pen and paper, your calculator and watch this quick video to start improving your credit utilization.
Credit utilization is one of the simplest ways to start improving your credit risk profile. Simply using your credit cards a little less each month or starting to pay down your credit card balances can have an immediate positive impact on your credit.