Question

4. Suppose you have two credit cards. The first has a balance of $410 and a credit limit of $1,000. The second has a balance of $510 and a credit limit of $1,000. What is your overall credit utilization?

Answer 1

Credit Utilization = Credit Balance / Credit Limit * 100For N-cards, Credit utilization = (credit Utilization of Card1 + credit Utilization of Card1 +  .... credit Utilization of CardN ) / N
For our case: Credit Utilization for Card 1 (CU1) = $410/$1000 = 0.410 = 41%Credit Utilization for Card 1 (CU2) = $510/$1000 = 0.510 = 51%Overall credit Utilization = Average of all the CUs for all the cards = (CU1 + CU2)/2 = 46%