**Understanding Business Credit and calculating Utilization

To effectively manage business credit, it’s essential to understand how revolving debt works, particularly through credit cards. Most credit cards report to credit bureaus like Experian, where your credit utilization ratio plays a crucial role.

### Key Concepts:

1. **Credit Utilization**: This is the ratio of your current credit card balances to your credit limits. A higher utilization ratio can negatively impact your credit score. Ideally, you should aim to keep your utilization below 30%.

2. **Reported Credit Limit**: The total amount of credit extended to your business becomes important in determining your credit utilization. If your business is approved for a credit line of $50,000 and you spend $25,000, your remaining credit will be $25,000.

3. **Impact of Payments on Credit Reporting**: If you make a payment of $2,000 towards your balance, the reporting would reflect:

- **Current Balance**: $25,000 (amount spent)

- **Remaining Credit**: $23,000 (after the payment)

- **Credit Utilization**: This would leave your business with a utilization rate of 90% ($25,000 spent out of a $50,000 limit).

### Scoring Factors:

Your business credit score is influenced by several factors, including:

- **Payment History**: How timely and consistently you make payments.

- **Credit Utilization**: The balance-to-limit ratio as described above.

- **Credit Usage**: What you spend versus what remains available.

Understanding these components will help you manage your business credit effectively and improve your overall credit score.

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