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Credit 101: Credit Utilization

Credit card utilization refers to the percentage of your credit card limit that you're currently using. For example, if you have a credit card with a $10,000 limit and a current balance of $3,000, your credit card utilization would be 30%.

Credit card utilization is an important factor in determining your credit score, as it accounts for about 30% of your FICO score. Generally, it's recommended to keep your credit card utilization below 30% to maintain a good credit score.

When you use a high percentage of your credit card limit, it can signal to lenders that you may be at risk of overextending yourself financially. This can lower your credit score and make it more difficult to qualify for credit in the future.

To keep your credit card utilization low, consider making multiple payments throughout the month to keep your balance low, or requesting a credit limit increase to decrease your utilization. Additionally, you can avoid using your credit card for unnecessary purchases and instead use it for essential expenses that you can pay off each month.

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