Financial Counseling Certification Program (FiCEP) Practice Exam

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Individuals with high credit scores typically have what characteristic regarding their credit use?

  1. A high percentage of available revolving credit

  2. A low percentage of available revolving credit

  3. No revolving credit at all

  4. Extensive open credit lines

The correct answer is: A low percentage of available revolving credit

Individuals with high credit scores typically demonstrate a low percentage of available revolving credit usage. This means that they maintain low balances relative to their total credit limits. A key factor in credit scoring models, such as FICO, is the credit utilization ratio, which looks at how much of an individual's available credit is being used. When credit utilization is low, it indicates to lenders that the borrower is managing their debt responsibly. This responsible behavior includes making on-time payments and not overly relying on credit, which builds a positive credit history. In contrast, high utilization rates may signal risk to lenders, potentially lowering an individual's credit score. Therefore, maintaining a low percentage of revolving credit usage is a strong indicator of a healthy credit profile, which is essential for individuals seeking to achieve and sustain high credit scores.

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