What is Credit Utilization Rate?
Definition of Credit Utilization Rate
Credit Utilization Rate, also known as Credit Utilization Ratio, is a term used to describe how much of your available credit you're using at any given time. This rate is expressed as a percentage and calculated by dividing your total credit card balance by your total credit card limit.
For example, let's say you have a total credit limit of $1,000 across all your credit cards and you've used $500. Your credit utilization rate, in this case, would be 50% because $500 is half of $1,000.
Understanding this rate is important because it makes up a significant portion of your credit score. Typically, it is recommended to keep your Credit Utilization Rate low, ideally under 30%, as a high rate may indicate to lenders that you are at risk of being unable to repay your debts.
3 things to know about Credit Utilization Rate
1. Significant Impact on Credit Score: Credit utilization rates have a major impact on your credit score, accounting for approximately 30% of it. Keeping this rate low can help improve your score over time, depicting you as a responsible borrower to potential lenders. 
2. Lower is Better: Generally a higher credit utilization rate is not better. A lower rate, specifically below 30%, is usually recommended as it implies you're not heavily reliant on credit and likely to manage your debts effectively. 
3. Balances Across All Cards: It's important to note that your credit utilization rate is not just about one card. It takes into account all your credit cards and their balances. So, having one card maxed out might still adversely affect your total rate, even if your other cards have low or zero balances.
What's the Credit Utilization Rate of Americans?
According to Experian, one of the major credit reporting agencies in the United States, as of Q3 2022, the average credit utilization rate among Americans is 28% of their total available credit. This average, however, can fluctuate based on economic factors, individual lending habits, and changes in credit lending policies. 
Citations and links
  https://www.myfico.com/credit-education/blog/credit-utilization-be
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