What aspect of a borrower's credit behavior does "utilization" measure?

Utilization measures how much a borrower owes in relation to their available credit. This ratio is crucial in assessing creditworthiness since it provides insight into how well the borrower manages their credit. A lower utilization ratio typically indicates responsible credit use, suggesting the borrower is not overly reliant on credit and is maintaining a good credit management strategy. Lenders often prefer to see a utilization rate below 30% as it reflects positively on the borrower’s financial behavior.

This concept contrasts with other elements of credit behavior, such as the number of credit inquiries, which examines how frequently a person applies for new credit, or the history of late payments, which focuses on the timeliness of payments. Additionally, types of credit accounts pertain to the variety of credit sources the borrower has rather than how they manage existing credit, which is what utilization specifically addresses.