Credit Utilization Ratio (CUR)

The credit utilization ratio (CUR) is a key credit score factor that measures the percentage of your available credit that you are actually using. It’s calculated by dividing your total revolving credit utilization (the total amount you’re borrowing on credit cards and other revolving credit accounts) by your total credit limit.

Formula:

Credit Utilization Ratio (CUR) = (Total Revolving Credit Usage) / (Total Credit Limit) x 100%

Components:

• Total Revolving Credit Usage: The total amount you’re borrowing on revolving credit accounts, such as credit cards and lines of credit.
• Total Credit Limit: The total credit limit available to you on all your revolving credit accounts.

Impact on Credit Score:

• Low CUR: A low CUR indicates that you’re using a low percentage of your available credit, which is favorable for your credit score.
• High CUR: A high CUR shows that you’re utilizing a significant portion of your available credit, which can negatively impact your score.

Best Practices:

• Keep your CUR below 30%.
• Use less than 50% of your available credit.
• Pay your bills on time and in full.
• Maintain a healthy credit history.

Example:

Suppose you have a total credit limit of $10,000 and your total revolving credit usage is $2,000. Your CUR would be:

CUR = ($2,000) / ($10,000) x 100% = 20%

In this example, your CUR is 20%, which is considered favorable.

Additional Notes:

• CUR is a factor in all three major credit scoring models (Equifax, Experian, TransUnion).
• The impact of CUR on your score can vary depending on your other credit factors.
• If you have a history of late payments or other credit problems, having a low CUR may not significantly improve your score.