Credit Card Utilization Ratios: What is CCU Credit?

Your credit card utilization ratio, also known as your CCU, is one of the most important factors used when determining your credit scores. So what is it and what factors affect it? Let’s find out.

Credit Card Utilization Definition

Your credit card utilization ratio and percentage measure how much credit you have used compared to your available limits on your credit cards and other lines of credit. While these may seem abstract amounts to track, they’re actually a good way of measuring how well you manage your revolving debt. That’s why creditors pay close attention to these numbers.

Providing you use revolving credit wisely, you can enjoy a convenient steady form of accessible credit. You can use it for as long as you want, providing you pay back what you borrow according to the creditor’s terms.

However, those that handle revolving credit poorly tend to have a much harder time getting credit. Lenders are reluctant to offer you more credit or lend you more money.

One definite factor creditors look at is the relationship between how much you owe and your credit limit. If you carry high balances, it throws up a red flag to lenders. This makes it seem like you are struggling to cope with your debt load.

As a result, establishing and maintaining good credit is always a balancing act. You must consider whether it is smart for you to borrow or whether you should avoid taking on more debt. Revolving credit can become a problem, but it can also be a powerful resource that makes it easier to borrow quickly when you need money.

Luckily, once you grasp your CCU meaning you can make it work for you. This can lead to improved credit scores and potentially more access to additional credit and better products.

Credit Card Utilization Ratio & Percentage

The credit reporting agencies express your credit card utilization as a percentage. This provides lenders with a quick snapshot of your current debt level. You have several routes you can take if your want to know yours.

Manually Calculate Your Credit Utilization Ratios & Percentages

You can manually calculate your credit card credit utilization ratios and percentages relatively easily. You’ll need to know the credit limits and balances on your credit cards and lines of credit.

Add the balances of your revolving credit and divide it by your total credit limits. That’s your credit utilization ratio. Multiply that number by 100 and you’ll have your credit utilization percentage.

As an example, Joe has two credit cards. The balance on the first is $200. The balance on the second is $400. He also has a line of credit with a balance of $5000.

The credit limit on the first card is $5,000 while the second credit limit is $3,000. The limit on his line of credit is $10,000. This is how we calculate Joe’s CCU:

As you may have noticed, Joe has a credit utilization ratio for each type of revolving credit, plus one overall CCU. Both the utilization of each of his individual accounts and his overall credit utilization ratio can affect his credit scores.

Equally, the credit reporting agencies are interested in how well you manage each debt and your revolving credit as a whole.

Use a Credit Card Utilization Calculator

If you want a simpler method, you can certainly use a credit card utilization calculator. You’ll still need your credit limits and balances, but the app does the math for you.

What Percentage of Credit Usage is Good?

Obviously, your credit card utilization percentage is just a number, until you put it into context. As a general rule, lenders prefer a lower credit card utilization percentage, but how low depends on who you ask.

Some suggest 30% or less is optimal credit utilization. However, the credit reporting agencies differ when stating what percentage of credit usage is good. Transunion says you should keep your balances below 35%. Equifax recommends 30%, while Experian claims those with the best credit scores have credit utilization percentages in the single digits.

In our sample case showing Joe’s credit, his credit card utilization percentages on his credit cards are fine as is his overall CCU. However, his CCU on his line of credit is far too high at 50%. He needs to pay down his line of credit to bring his CCU in line with credit reporting agency recommendations.

Rationally, you might think it would be even better if everyone just had a 0% CCU, but that’s not the case either. Lenders want to see you have revolving credit and know how to use it. If you’re not using your credit at all, they have no way to judge whether you are a reliable borrower.

Luckily, when you use revolving credit wisely, you can solidify your credit card utilization percentage. Just pay your debts in full each month or at least as soon as possible.

What Happens If Your CCU is Too High?

Higher credit utilization percentages can negatively impact your credit scores. That can make it harder to borrow.

Having said that, some creditors may lend to you even if your credit utilization percentage is on the higher side. However, you can expect to pay more due to increased lender risk.

Clearly, it would be great if you could maintain an optimal credit utilization percentage. Yet, that may not always be possible. No one can plan for everything that life throws at them and in some cases you may face emergencies. If you need to borrow more money you can still do it. You just need to find the right lender.

100% CCU Meaning

If you have a 100% credit card utilization percentage, you’ve essentially used all your credit (at least on paper). Yes, this can happen when you max out your cards and line of credit, but it can also happen in another way.

One example that can elevate your CCU to 100% is when you almost charge up several credit cards to their limit and then decide to close a third credit card account, because you don’t use it. The unintended consequence is that you’ve just reduced the amount of overall credit available to you and raised your credit card utilization percentage to 100%.

For this reason, you should always keep revolving credit accounts open, even if you don’t use them. This maximizes the amount of overall credit used in CCU calculations.

CCU and Your Credit Reports

Clearly, an optimal credit utilization percentage would be ideal, because it accounts for 30% of your credit scores. Still, it is just one factor creditors use to understand your financial situation.

Nonetheless, it is only slightly less important than your payment history, which ranks number one in at 35%. Consequently, you must manage it or your credit scores will suffer.

Luckily, you can further understand how you can achieve the best credit card utilization percentage and how to improve your credit score by understanding all the factors that affect them.

Achieving the Best Credit Card Utilization Percentage

As you have read, your credit utilization ratio is an important factor used in your credit scores. If yours is too high, here are a few things that you can do to lower yours.

Pay Down Revolving Credit Balances

Start by earmarking a set amount each month to pay off your revolving credit debt. This can have a significant effect on your overall CCU, especially if you know when your credit card company reports to the credit reporting agencies. Pay your payments beforehand so the changes in your balances appear on your credit reports.

Increase Credit Limits

If possible, ask for a credit increase on each of your credit cards. Your creditors may do this if your income or credit score increased. Companies are also likely to grant an increase if you’ve demonstrated you’re a reliable borrower and you’ve made your payments on time.

Another possibility is to open a new line of credit to bump up your available overall credit. This lowers your credit utilization percentage. Be sure to choose a company that uses a soft credit inquiry that doesn’t negatively impact your credit scores.

This method is only recommended if you know you can resist the temptation to rack up more debt. Otherwise, you could increase your credit card utilization percentage, instead of lowering it.

Finding Good Lenders, Regardless of Your CCU

Your best credit card utilization percentage may not be good enough for mainstream lenders, but that doesn’t mean you can’t borrow. Every lender has their own criteria, loan process, and interest rates.

Luckily, you don’t need to waste time searching for the best possible lenders. FlexMoney does it for you. We offer a simplified loan process and can help you find the best interest rate and your best borrowing options. Our network includes a wide variety of reputable lenders offering top-notch online loans.

Fill out one application and we immediately align you with your best possible options. It’s simple and the application process does not affect your credit scores. You could qualify for anything from a quick cash to a personalized installment loan within minutes.

Apply today and connect with the best alternative lending platform in the U.S. Borrow between $200 and $35,000. You could qualify even if your credit card utilization ratio isn’t ideal. Our lenders are less rigid and cater to a variety of borrowers. Let us help you find the ideal lender and loan, quickly and easily.