Financial Counseling Certification Program (FiCEP) Practice Exam

Maintaining a good credit score is significantly influenced by keeping credit utilization low. Credit utilization refers to the ratio of your current credit card balances to your credit limits. This is an important factor in credit scoring models, as it reflects how much of your available credit you are using. A lower utilization ratio indicates to lenders that you are not overly reliant on credit and are managing your debt responsibly. Ideally, it is recommended to keep your utilization below 30%, or even lower for optimal scoring.

By consistently keeping credit utilization low, individuals demonstrate good financial habits, which positively impacts their credit score and makes them more attractive to lenders. This practice signals that you are using credit responsibly, which can lead to better interest rates and loan approvals in the future.