Hi friends.

thanks for downloading the Money Girl Podcast.

I'm Laura Adams.

When it comes to credit scores, there are several key factors that cause them to go up or down.

In this episode, I'll answer five questions from Money Girl listeners and readers about one of them called the credit utilization ratio.

To build excellent credit, making payments on time is king because it makes up the largest

percentage of your credit scores. But the next most powerful factor is

credit utilization. So I guess that makes it the credit queen.

Your credit utilization ratio is a simple formula that divides your outstanding balance on

a revolving account like a credit card or a line of credit by your available

credit limit on the account. For example if you currently owe $500 on a credit

card that has a credit limit of a thousand, your ratio is

five hundred dollars divided by a thousand or fifty percent. The lower your

credit utilization ratio, the better.

A low ratio tells potential lenders and merchants that you're using credit responsibly.

A high ratio says you're maxed out and may even be getting close to missing a payment.

Now that you know the basics, let's cover five specific questions that I've received about credit utilization.

Question number one is from an anonymous reader who asks,

I'm a student and will be getting my first secured credit card soon

with a $300 credit limit.

To bill credit quickly, what's my ideal credit utilization ratio?

A secured credit card is the perfect way to bill credit for the first time.

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