The credit utilization rate (or ratio) measures the
amount of available credit you are currently using, typically related to your
credit cards. This ratio has a significant impact on your overall credit score.
Lenders and financial experts often recommend that you look
at your credit utilization rate before applying for debt consolidation. If you
are utilizing more than 30% of your available credit on your credit
cards, it is advisable to pay down your balances to improve your score before
seeking a loan. Failing to manage this ratio by accumulating new balances after
consolidation increases your credit utilization ratio, which can damage your
credit score.
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