Question

1. does the method for calculating credit scores seem fair to you? why or why not?

video: what is credit utilization
the previous video showed that credit history has the largest impact on your credit score and late payments should be avoided whenever possible. just behind credit history in terms of impac on your credit score is your credit utilization.

1. answer the following hypotheticals about how much credit you are utilizing:

a. $750 of a $2000 limit?
b. $1000 of a $5000 limit?
c. $1234 of a $3500 limit?
d. $198 of a $1000 limit?
e. $250 of a $2500 limit?

Explanation:

Step1: Calculate credit utilization rate formula

Credit utilization rate = (Credit used / Credit limit) × 100%

Step2: Calculate for part a

For $750$ of a $2000$ limit: $\frac{750}{2000}\times100\% = 37.5\%$

Step3: Calculate for part b

For $1000$ of a $5000$ limit: $\frac{1000}{5000}\times100\%=20\%$

Step4: Calculate for part c

For $1234$ of a $3500$ limit: $\frac{1234}{3500}\times100\%\approx35.26\%$

Step5: Calculate for part d

For $198$ of a $1000$ limit: $\frac{198}{1000}\times100\% = 19.8\%$

Step6: Calculate for part e

For $250$ of a $2500$ limit: $\frac{250}{2500}\times100\%=10\%$

Answer:

a. $37.5\%$
b. $20\%$
c. $\approx35.26\%$
d. $19.8\%$
e. $10\%$