What is credit utilization and why does it matter?

Credit utilization is the percentage of your available revolving credit you are using. If your card has a $10,000 limit and your balance is $3,000, your utilization is 30%. FICO recommends keeping utilization below 30%, but the best credit scores typically show utilization under 10%. High utilization signals financial stress to lenders. Paying down balances or requesting a higher limit (without increasing spending) both reduce utilization.