## DEFINITION of 'Balance-To-Limit Ratio'

The amount of money you owe on your credit cards compared to your credit limit. The balance-to-limit ratio is also called your credit utilization ratio. This ratio is important because it shows how carefully youâ€™re managing your available credit. Credit scoring companies consider this ratio when determining your credit score, and a low ratio is better for your score than a high ratio.

Next Up

## BREAKING DOWN 'Balance-To-Limit Ratio'

If you only have one credit card with a \$2,000 limit and a \$200 balance, your balance-to-limit ratio is incredibly easy to calculate: \$200 / \$2,000 = 0.10. In other words, youâ€™re using 10% of your available credit.

If you have several credit cards, the math is still easy. Just add together all of your balances and all of your credit limits, then divide your total balance by your total credit limit. For example, if card 1 has a \$300 balance and a \$1,000 limit, card 2 has a \$400 balance and a \$2,000 limit, and card 3 has a \$600 balance and \$3,000 limit, your balance total is \$1,300 (\$300 + \$400 + \$600) and your credit limit total is \$6,000 (\$1,000 + \$2,000 + \$3,000).

Divide \$1,300 by \$6,000 to get your balance-to-limit ratio: 0.22, or 22%.

RELATED TERMS
1. ### Zero Balance Card

A credit card on which a consumer does not owe any money because ...
2. ### New Balance

The new balance is the sum of your previous balance, payments, ...
3. ### Minimum Payment

The smallest amount of a credit card bill that a credit card ...
4. ### Credit Mix

The different categories of debt within a consumer's credit history ...

A business credit card is a credit card intended for use by a ...
6. ### Secured Credit Card

A secured credit card is a type of credit card that is backed ...
Related Articles
1. Personal Finance

### 6 Benefits of Increasing Your Credit Limit

If you can resist the urge to overspend, then raising your credit limit could benefit you in various ways.
2. Personal Finance

### 3 Easy Ways To Improve Your Credit Score

A better credit score can improve your financial future. How can you improve your score?
3. Personal Finance

### Why and How to Use Credit Cards Effectively

When used responsibly, credit cards play a big role in establishing a good credit score that can help you obtain loans, mortgages and insurance.
4. Personal Finance

### Should You Close Your Credit Card?

Find out the consequences before deciding to end your credit agreement.
5. Personal Finance

### 4 Reasons To Increase Your Credit Card Limit

It seems contrary to smart financial planning, but increasing your credit limit can actually be a smart move.
6. Personal Finance

### 4 Common Credit Card Misconceptions

Many Americans think these credit card "rules" are true. Read on to find out the facts.
7. Personal Finance

### Should Your Credit Rating Scare You?

Take the mystery out of credit scores by learning the most important ways it can impact your life.
8. Personal Finance

### 4 Habits That Damage Your Credit Score

Many common money habits can affect your credit score negatively without you even knowing it.
9. Retirement

### 7 Ways to Use a Strong Credit Score During Retirement

Find out why it is important to maintain a good credit in retirement. Learn seven reasons not to leave your credit score behind when you retire.
10. Personal Finance

### How Many Credit Cards Should You Have?

National stats indicate most consumers have three or more cards - are you one of them?
RELATED FAQS