When evaluating credit, creditors consider the type
and amount of debt an individual has and the rate of
credit utilization. For revolving accounts, the rate
of credit utilization is measured as the proportion of
available credit in use (outstanding balance divided
by the maximum amount the individual is autho-
rized to borrow, referred to as the credit limit). For
installment and mortgage accounts, credit utiliza-
tion is generally measured as the proportion of the
original loan amount that is unpaid. High rates of
credit utilization are generally viewed as an addi-
tional risk factor in credit evaluations, as they may
indicate that an individual has tapped all available
credit to deal with a financial setback, such as a loss
of income.
RSS
When evaluating credit, creditors consider the type and amount of debt an individual has and the rate of credit utilization. For revolving accounts, the rate of credit utilization is measured as the proportion of available credit in use (outstanding balance divided by the maximum amount the individual is autho- rized to borrow, referred to as the credit limit). For installment and mortgage accounts, credit utiliza- tion is generally measured as the proportion of the original loan amount that is unpaid. High rates of credit utilization are generally viewed as an addi- tional risk factor in credit evaluations, as they may indicate that an individual has tapped all available credit to deal with a financial setback, such as a loss of income.