Which action can lead to a lower credit utilization ratio?

Paying down existing debt is the action that effectively leads to a lower credit utilization ratio. The credit utilization ratio is calculated by dividing the total amount of credit used by the total credit limit available. When you pay down your existing debts, you reduce the numerator (the total debt) without affecting the denominator (the total credit limit), thereby decreasing the credit utilization ratio.

A lower credit utilization ratio is generally considered beneficial for your credit score, as it signals to creditors that you are managing your credit responsibly by not relying too heavily on borrowed funds. Keeping your utilization below 30% is often recommended to maintain or improve creditworthiness.

In contrast, using all available credit limits increases the amount of credit being utilized, leading to a higher ratio. Applying for multiple credit cards can potentially increase your credit limits, but it does not address existing debt directly and can also reflect negatively on your credit score due to multiple inquiries. Maximizing credit limits without paying down debt could also lead to a higher utilization ratio as it doesn't effectively manage current debt levels. Thus, the best approach to improving your credit utilization is through paying down existing debt.