What is the benefit of keeping a low credit utilization ratio?

Maintaining a low credit utilization ratio is beneficial because it directly impacts your credit score in a positive manner. Credit scoring models, such as FICO, consider credit utilization as a key factor when calculating scores. A lower ratio suggests that you are using only a small portion of your available credit, which signals to lenders that you are responsible with credit management. This responsible behavior can lead to a higher credit score, making you more attractive to lenders and potentially qualifying you for better loan terms in the future.

While a low credit utilization ratio may also have indirect effects on interest rates and available credit, the primary and most immediate benefit is its positive influence on your credit score.