Credit utilization is the ratio of your current credit card balance to that card's credit limit. Carry a $2,000 balance on a card with a $5,000 limit and your utilization is 40 percent. FICO weights utilization at about 30 percent of your score, more than payment history's weight in many scoring models.
Why 30 percent
The exact threshold varies by lender and scoring version, but the consistent finding is that utilization above 30 percent on any one card or in aggregate begins to materially lower your score. Above 50 percent, the drop accelerates. Below 10 percent is where scores tend to peak.
What this means for paying off debt
The card you pay down first does not just save interest, it also lifts your score, which can lower the APR on future borrowing. Refinancing options open up below 30 percent utilization. Many auto and mortgage lenders use 700 as a soft cutoff for their best rates, and dropping below 30 percent utilization on a maxed-out card can move you 30 to 60 points.