One of the factors used in figuring your credit score is the amount of money that you owe. It's a big one, accounting for 30 percent of your score. Within the category, the credit scoring formula looks at your debt-to-credit ratio, also known as your credit utilization, which measures how much of your available credit you're currently using. For example, while $5,000 might be a lot of debt for someone who only has $6,000 of available credit, it's not much when that person could tap into $100,000 of credit limits across all her cards.
Add all of your credit card balances to figure your total credit card debt. For example, if you owe $400 on Credit Card A, $1,600 on Credit Card B and $0 on Credit Card C, your total debt is $2,000.
Add your maximum credit lines for each credit card to figure your total credit amount. Include the limits for all your credit cards, even if you don't currently have a balance on them. Continuing the example, if your credit limit is $1,500 on Credit Card A, $4,000 on Credit Card B and $2,500 on Credit Card C, your total credit limit is $8,000.
Divide your total debt by your total credit limit to figure your debt-to-credit ratio. In this example, divide $2,000 by $8,000 to find that your debt-to-credit ratio is 0.25, or 25 percent.
- The lower your debt-to-credit ratio is, the higher your credit score will be. According to Bankrate.com, your credit score starts to dip when your debt-to-credit ratio exceeds 10 percent, but many experts say a ratio between 30 and 50 percent is acceptable.
- According to Bankrate.com, your credit score could be negatively affected if you have one card with a balance close to the limit even though your overall debt-to-credit ratio is low. For example, if one of your cards is almost maxed out but you have two other cards you don't use, that can hurt your score even though your overall ratio is low.
Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."