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  • Writer's pictureSubhan Tariq, Esq

How to Improve Your Credit Utilization Ratio



Your credit utilization ratio is one of the most important factors that lenders consider when determining your credit score. It is calculated by dividing your total outstanding debt by your total available credit. A high credit utilization ratio can lower your credit score, while a low credit utilization ratio can help improve it. In this blog we'll illustrate the impact of credit utilization on credit scores and share practical tips to help you optimize this ratio, paving the way toward a brighter financial future.


There are a few things you can do to improve your credit utilization ratio:

  • Pay down your debt. This is the most important thing you can do to improve your credit utilization ratio. The lower your outstanding debt, the lower your credit utilization ratio will be.

  • Pay off smaller balances first. If you have multiple credit cards with balances, consider paying off smaller balances first. This approach can lead to a quicker reduction in credit utilization ratios on individual cards.

  • Increase your available credit. You can increase your available credit by asking your creditors for a credit limit increase. You can also get a new credit card with a higher credit limit.

  • Use your credit wisely. Only charge what you can afford to pay off in full each month. Avoid carrying a balance from month to month.

  • Avoid closing credit cards. Closing a credit card may decrease your available credit, potentially raising your credit utilization ratio. Instead, keep the card active with occasional small purchases to maintain a healthy credit history.

  • Regularly monitor your credit utilization. Stay vigilant and aim to keep your credit utilization ratio below 30%. Regularly monitoring your credit reports and scores can help you identify areas for improvement.

Here are some case examples of how improving your credit utilization ratio can help you get approved for a loan:


Case Example 1: John's Journey to Financial Freedom

John has a credit card with a $10,000 limit. He consistently carries a balance of $9,000 each month, resulting in a high credit utilization ratio of 90%. Due to this, his credit score suffers, making it difficult for him to obtain favorable loan terms.

To improve his credit utilization ratio, John comes up with a strategy to pay down his balances:

He starts by allocating a fixed amount each month toward his credit card debt. Within a few months, John manages to reduce his balance to $3,000, significantly lowering his credit utilization ratio to 30%.

As a result, his credit score begins to rise, opening doors to better financial opportunities.


Case Example 2: Sarah's Credit Card Shuffle

Now let's meet Sarah, who has multiple credit cards with varying credit limits. She carries balances on each card but has a relatively low credit utilization ratio overall.

Sarah realizes that although her overall credit utilization ratio is acceptable, the individual balances on some cards are high. To optimize her credit utilization ratio further, she considers two strategies: balance transfers and consolidation.

Sarah transfers high-interest balances to a card with a lower interest rate, minimizing interest expenses and increasing her credit score. She also consolidates her outstanding balances onto a single card, to simplify financial management and streamline payments.


Taking proactive steps to improve your credit utilization ratio will enhance your creditworthiness. If you are looking to improve your credit score, paying down your debt and increasing your available credit are two of the most important things you can do. And remember, consistently monitoring your credit utilization and making responsible financial decisions will set you on the path to financial success. Reach out to us at info@tariqlaw.com with any queries you may have, or we can help you with any issues you’re facing if you submit a free case review request.

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