Question

what is credit utilization ratio?
a. the difference between your credit limit and your income
b. the amount of credit you are using relative to your credit limits
c. the percentage of your credit score that is based on payment history
d. the total amount of your outstanding debts

Explanation:

Credit utilization ratio is calculated by dividing the amount of credit being used by the total credit limit. It shows the proportion of available credit that a person is using. Option a is incorrect as it involves income which is not part of the credit - utilization - ratio formula. Option c is about payment history's impact on credit score, not credit utilization. Option d is just the amount of debt without considering the credit limit. Option b correctly describes the credit utilization ratio as it relates the used credit to the credit limits.

Answer:

B. The amount of credit you are using relative to your credit limits