What "credit utilization ratio" means in finance

Credit utilization ratio is a measure of the amount of credit you are using compared to the amount of credit you have available. It is calculated by dividing the total amount of credit you are using by the total amount of credit you have available. For example, if you have a credit card with a $5,000 limit and you have a balance of $1,000, your credit utilization ratio is 20%. A high credit utilization ratio can have a negative impact on your credit score and make it harder to get approved for new credit. The recommended credit utilization ratio is 30% or less.