What can high credit utilization impact?

High credit utilization significantly impacts credit score, primarily by lowering it. Credit utilization refers to the ratio of your current credit card balances to your credit limits. When this ratio is high, it indicates to lenders that you may be overextending yourself financially, which can be viewed as a risk. High credit utilization typically means that a significant portion of your available credit is being used, which can signal to credit scoring models that a consumer might be experiencing financial difficulty or is more likely to default on payments.

A lower credit score can result in less favorable lending terms or even denial of credit applications. Managing your credit utilization by keeping it below 30% of your limit is generally advised to maintain or improve credit scores. Therefore, it is crucial to monitor credit utilization to have a healthy credit score and enhance your overall financial health.