Part of your credit score is the amount of credit utilized vs available. So if you have like a $1000 limit and use 50% of that on a monthly basis and everything else is equal you will have a lower credit score than someone with a $25000 limit and using that same $500 per month.
It's the ratio between your balance and available credit it's true but if yo pay off your balance every month it doesn't really matter as the ratio between $0.00 owed and $1,000.00 available and $0.00 owed and $25,000.00 availabe is exactly the same. Now if you are carrying a balance on one card and cancel a different card then your score takes a hit because your ration has changed by the amount available on the closed card.
I just did this research becuase I finally got rid off all my credit card debt by borrowing money from family. (yeah family) one upside of the poor economic condition in the country right now is it actually makes good economic sense for my mother in law to take money out of her retirement investements and lend it to me at 5% interest over two years. She's going to make more on that couple grand than she would have leaving it in mutual funds.