Credit utilization ratio is a core signal used in many credit scoring models to approximate how heavily a person is using available revolving credit. It’s calculated from balances relative to limits across open credit card accounts. Lower utilization can suggest prudent management and more headroom in case of emergencies, while higher usage may indicate financial strain. Because it updates frequently, small changes—like paying down a balance before a statement closes—can shift the ratio. Understanding this metric helps consumers plan purchases, schedule payments, and maintain healthier credit profiles over time.