One of the most influential factors in your credit score is something many people overlook: credit utilization. This simple percentage can make or break your credit rating, yet it's also one of the easiest aspects to control once you understand how it works. In this article, we’ll explain what credit utilization is, why it matters, and how to manage it to improve your credit health.

**What Is Credit Utilization?**
Credit utilization refers to the amount of revolving credit you’re using compared to your total available credit limit. It’s expressed as a percentage and applies primarily to credit cards and lines of credit.

For example, if you have one credit card with a $5,000 limit and a $1,500 balance, your credit utilization ratio is 30%. If you have two cards with a combined limit of $10,000 and a total balance of $3,000, your utilization is still 30%.

**Why Credit Utilization Matters**
Credit utilization accounts for about 30% of your FICO score, making it the second most important factor after payment history. High utilization suggests you may be over-reliant on credit, which increases risk in the eyes of lenders. Low utilization, on the other hand, shows that you’re using credit responsibly and not maxing out your cards.

Keeping your utilization below 30% is considered good practice, but below 10% is even better for maximizing your score. Utilization is calculated both on a per-card basis and across all your revolving accounts, so it’s important to manage each card wisely.

**How to Calculate Your Utilization**
The formula is simple:
**(Total Credit Card Balances ÷ Total Credit Limits) × 100 = Credit Utilization %**

Example:
- Card 1: $500 balance / $2,000 limit = 25%
- Card 2: $300 balance / $1,000 limit = 30%
- Total Utilization: ($800 ÷ $3,000) × 100 = 26.7%

**Tips to Lower Your Credit Utilization**
1. **Pay Down Balances Frequently**: Don’t wait until the due date. Paying down your card before the statement closes can lower the balance reported to credit bureaus.

2. **Increase Your Credit Limit**: Ask your card issuer for a higher limit. If your spending stays the same, your utilization ratio will drop. Just be sure not to increase spending along with the limit.

3. **Open a New Credit Card**: Adding another card increases your total available credit, which can improve your utilization ratio—especially if you don’t carry a balance on the new card.

4. **Spread Out Charges Across Multiple Cards**: Rather than loading up one card, use several cards with low balances to help keep utilization per card lower.

5. **Avoid Closing Old Cards**: Keeping older cards open maintains your total credit limit and may help your credit score overall.

**Common Mistakes to Avoid**
- **Maxing Out Cards**: Even if you pay them off in full, maxing out cards can still hurt your score if the statement balance is high when it’s reported.
- **Relying on One Card**: Using only one credit card for all purchases can inflate your utilization on that card.
- **Ignoring Statement Dates**: Your credit card issuer reports your balance at the statement closing date, not the due date. Pay early if you're close to 30%.

**Final Thoughts**
Credit utilization may seem like a small detail, but it has a big impact on your credit score. By keeping your balances low and managing your credit limits wisely, you can boost your score and improve your overall financial profile. Regular monitoring, strategic payments, and responsible card use are key to maintaining an optimal utilization ratio—and by extension, a healthy credit score.