What is a Utilization Rate and How Does it Work?

A utilization rate is the amount of credit you’re using divided by the total amount of credit you have available.

For example, let’s say you’ve been approved for a line of credit for $100. If you choose to withdraw all $100 that you were approved for, your utilization rate is 100%. If you choose to withdraw only $20 from the available $100, then your utilization rate is 20%.

What Utilization Rate Should I Choose?

With our Credit Building feature, you get to choose your utilization rate, but we recommend setting it at 30%. Our Credit Building experts have determined that a utilization rate above 30% is not ideal for increasing your credit score (it is likely to still increase, however potentially not as much as with a lower utilization rate).

Can I Change My Utilization Rate?

Yes! You can reset your utilization rate every month on the date of the score update specified in-app. The utilization rate can’t be changed before then.

Each month when you receive your score update, your utilization automatically resets to 0. When you open up the Credit Building page, the KOHO app will prompt you to confirm whether you’d like to set the same utilization rate as last month or select a new one. If you change your mind, you can still alter your utilization rate for up to three days afterwards by selecting Edit on the Credit Building page.

How Can I Access My Utilization Rate?

We’ll issue dedicated funds to your account based on your selected utilization rate, which is set aside for you to grow your credit with. These are funds that are dedicated to Credit Building and separate from your available balance.

We recommend keeping these funds locked away to ensure you maximize your potential to grow credit with this tool, however, if you wish to access those funds, you can select the Profile icon in the upper right of your app, scroll down to Credit building funds, and select Edit in the upper right to Transfer out funds.

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