Credit Utilization: The percentage of a consumer’s available credit that he or she has used. The credit utilization ratio is a key component of your credit score. It’s a formula that divides your outstanding balance on a revolving account—like a credit card or a line of credit—by your credit limit on the account. For example, if you currently owe $500 on a credit card with a $1,000 credit limit, your ratio is $500 divided by $1,000, or 50%.
