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Credit Card Utilization: How Much of Your Credit Should You Use?

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Jessica Merritt
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Jessica Merritt

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A long-time points and miles student, Jessica is the former Personal Finance Managing Editor at U.S. News and World Report and is passionate about helping consumers fund their travels for as little ca...
Edited by: Keri Stooksbury
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Keri Stooksbury

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With years of experience in corporate marketing and as the Executive Director of the American Chamber of Commerce in Qatar, Keri is now Editor-in-Chief at UP, overseeing daily content operations and r...

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There are a number of factors that go into calculating your credit score, and the credit card utilization ratio is one of the most important metrics in credit scoring models. But if you’re looking at credit card utilization to improve your credit score, aim to charge no more than 30% of your credit limit in any statement period.

If you have a high credit utilization ratio it means you’re close to maxing out your credit cards — and it’s likely to hurt your credit score. A low credit utilization ratio suggests you’re responsible with your credit and can improve your credit score. Having a higher credit score can make it easier to get approved for new credit at good terms, such as additional credit cards, loans, or a mortgage.

It’s a good idea to keep your credit card utilization under 30%, but 0% isn’t ideal either. An ideal credit card utilization ratio is around 4% to 10% of your credit limit, so, for example, that would mean spending about $400 to $1,000 on a credit card with a $10,000 credit limit.

Learn more about credit card utilization and how you can manage it to increase your credit score.

How Credit Utilization Works for Credit Cards

Your credit utilization refers to how much of your available credit you use. It’s usually expressed as a ratio percentage, which is how much credit you’re using divided by your credit limit, then multiplied by 100

For example, if you have a credit card with a $10,000 credit limit and you have a balance of $1,000, you have a credit utilization ratio of 10%. If you have a balance of $5,000, your credit utilization ratio is 50%. 

Why Credit Card Utilization Matters

Your credit utilization ratio matters because your credit score depends on it. Depending on the credit scoring model, credit utilization makes up 20% to 30% of your credit score. It’s one of the most important credit scoring factors, second only to payment history.

Credit scoring models rely heavily on credit utilization because it’s a good measure of how well you can manage credit. If you have a high credit utilization ratio — meaning you’re close to or already are maxing out credit cards — that suggests you’re overspending and may find it difficult to pay your balances on time.

Credit utilization is a major factor in your credit score, and the great news is it’s a factor you can see the most immediate improvement on. It’s calculated each month based on your current reported balances and credit limits. So if you’re able to minimize balances, increase your credit limit, or both, you could see credit score improvement in your next statement period. 

The inverse is also true — if you have a high spending month that increases your credit utilization, you can quickly see your credit score drop within a statement period. But if you can pay your bills on time and get back to a 4% to 30% credit utilization ratio, you’ll be in good shape once again.

Overall Credit Utilization vs. Per-card Credit Utilization

In addition to per-card credit utilization ratios, you have an overall credit utilization ratio. Your overall credit utilization ratio is the sum of all of your credit card balances divided by the total amount of your credit limits.

So let’s say you have 2 credit cards: a card with a $10,000 credit limit and a $5,000 balance and a card with a $20,000 limit and a $2,000 balance. Your credit utilization ratio on the first card is 50% and 10% on the second card, but your overall credit utilization ratio is 23%.

Pay attention to both your per-card and overall credit utilization ratios. In general, you’ll want to keep your overall credit utilization ratio low and avoid getting too close to the limit on any single credit card.

How To Calculate Credit Utilization on Credit Cards

Man with calculator
You can do the math to calculate your credit utilization ratio or use a credit health tool to do it for you. Image Credit: Towfiqu Barbhuiya via Unsplash

You can calculate your credit utilization ratio by comparing your current balances to your credit limits. You can find both of these key information points on your credit card statements.

To do the math on your credit utilization ratio, you take your balance and divide it by the credit limit. Then, multiply your answer by 100 to get your credit utilization ratio percentage.

SCROLL FOR MORE
Credit LimitCurrent BalanceCredit Utilization Ratio
Card 1$10,000$1,00010%
Card 2$5,000$1,50030%
Card 3$20,000$5,00025%
Total$35,000$7,50021%

Hot Tip: While you can do the credit utilization ratio math yourself using just the information on your credit card statements, you might get some additional insight by using a service that helps you monitor and analyze your credit. Generally, these services can calculate how much of your available credit you’re using and can offer suggestions for cards you should pay down first to improve your credit score.

What Is the Ideal Credit Card Utilization Ratio?

Keeping your credit card utilization ratio under 30% is the typical recommendation from financial experts. If you’re looking for the ideal credit card utilization, that’s around 4% to 10%. In general, a credit utilization ratio of 4% to 30% is fairly healthy.

If you’re aiming for perfect, consider this: the average credit utilization of consumers with 850 FICO credit scores — a perfect score — is 4.1%, which is well under 10%. For consumers with a 785+ FICO score, credit utilization is an average of 7%.

While less is usually better, a credit utilization ratio of 0% is not ideal because it doesn’t give the credit scoring models much information to work on. If you’re at 0%, the assumption is you’re not using your credit cards at all, which doesn’t give the credit scoring models enough information to determine whether you’re managing credit well.

Do You Need To Carry a Balance for Good Credit?

A common misconception is that you need to carry a balance month to month for a good credit utilization ratio. That couldn’t be more wrong. The balance reported to the credit bureaus is what’s on your account at the statement closing date, which you can and should pay off each month. 

If you pay off your credit card bill in full each month, your credit report will show the balance you had on your statement closing date, not what’s left after you make your payment.

Bottom Line: We recommend paying off your credit card bill each month to avoid debt and interest charges. You’ll still show credit utilization activity because credit card companies report your statement balance, not what’s left over after you paid.

What’s Your Credit Card Balance To Limit Ratio?

We know the ideal credit card utilization ratio is around 4% to 10%, though you’re still good up to about 30%. Let’s do the math on how much you should limit your credit card spending to each month if you’re concerned about your credit utilization ratio:

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Credit LimitFair Utilization (40%)Good Utilization (30%)Great Utilization (10%)
$250$100$75$25
$500$200$150$50
$2,000$800$600$200
$3,000$1,200$900$300
$5,000$2,000$1,500$500

You can see that the lower your credit limit, the less you can spend and still keep an ideal credit utilization rate. For example, on a credit card with a $250 limit, you should really only put about $25 to $75 on it each month for a good credit card utilization rate. On a credit card with a $5,000 credit limit, it’s good to shoot for about $500 to $1,500 max.

Hot Tip: Don’t confuse your credit card limit or ideal utilization ratio with your spending budget. It might be good for your credit to spend about $500 on a card with a $5,000 credit limit each month. But that doesn’t mean it’s a good idea for you to do that if it’s not an amount you can afford to pay off each statement period.

How To Hide Credit Card Utilization

Woman on couch shopping online
Making large purchases on your credit card, such as buying furniture or holiday gifts, can increase your credit utilization. Image Credit: Andrey_Popov via Shutterstock

If you want to show a lower credit card utilization, but still use a lot of your credit limit in any given month, you’ll need to pay off or pay down your credit card balance before the statement closing date. It’s on this date that your balance is usually reported.

You might want to lower your credit card utilization because you’re planning to apply for credit soon, or you usually have low reported balances but made a large purchase on your credit card and don’t want to see a dip in your credit score.

Let’s say you make a large purchase on a credit card that uses up a lot of your available credit. Maybe you needed a big-ticket item or directed spending to a particular card to meet a minimum spending amount for a sign-up bonus.

If you’re already planning to pay it off when your statement balance is due, it might make sense to pay it off in full or in part early before your credit card statement closes. That way, the amount reported to the credit bureaus will be the cleared balance, not the higher utilization balance.

You can look at your previous statements or log in to your credit card account to find out your statement closing date and figure out when your balance is reported. Then, you just need to make a payment that clears before that date. The credit card company will report the remaining balance, if any, instead of the full amount of charges you made during that statement period.

For example, let’s say you have a credit limit of $10,000 and make an $8,000 purchase. That puts you at an 80% credit utilization ratio. If you paid down $5,000 of that purchase before the statement closing date, it would leave you with a $3,000 balance reported to the credit bureaus — a 30% credit utilization ratio.

That said, it doesn’t have to be this complicated. Credit utilization is a pretty fluid factor on your credit score and it will fluctuate month to month depending on your balances and credit limits. A 1-month spike in credit utilization shouldn’t tank your credit score long term.

It might hurt your ego to see your credit score take a hit on a high-spending month, but it doesn’t matter unless you’re planning to apply for credit soon. If you can pay off high balances by your statement due date and get back to a healthy credit utilization ratio of 4% to 30% the next month, you’ll be in good shape. Just don’t let a high-spending month turn into large balances you carry month-to-month as credit card debt.

Bottom Line: Hiding credit card utilization is possible, but usually not necessary unless you need to apply for credit immediately.

How Does Credit Card Utilization Affect Your Credit Score?

Credit card utilization is a major factor in calculating your credit score. When you have a good credit card utilization ratio, it can support a good credit score. But high utilization can quickly lower your credit score, too. 

This factor is more fluid than other major factors such as payment history. While payment history sticks around for years, credit card utilization depends on your usage that month.

You can get help from free tools such as Chase Credit Journey, which can help you track your credit score and monitor what’s on your credit report. It also offers a credit score simulator, which allows you to adjust actions such as opening a new credit card or making a late payment to see how it might affect your credit score.

How Much Does Credit Card Utilization Affect Your Credit Score?

Let’s look at the factors that make up your FICO credit score:

  • Payment History: 35%
  • Amounts Owed: 30%
  • Length of Credit History: 15%
  • New Credit: 10%
  • Credit Mix: 10%

FICO credit score factors
Amounts owed make up 30% of your FICO credit score. Image Credit: FICO

Amounts owed (which is essentially your credit utilization ratio) is the second most important factor for your FICO credit score, making up 30% of your score. Only payment history — whether you make payments on time — is more important.

Let’s compare FICO’s scoring factors to VantageScore’s:

  • Payment History: 41%
  • Depth of Credit: 20%
  • Credit Utilization: 20%
  • Recent Credit: 11%
  • Balances: 6%
  • Available Credit: 2%

Credit utilization makes up just 20% of your VantageScore, but is still among the top 3 most significant scoring factors. Like FICO, payment history is at the top for VantageScore. But credit utilization and depth of credit are tied for second on VantageScore. The depth of your credit on VantageScore considers the age of your credit accounts.

Credit scoring models use credit utilization as an important scoring factor because it can tell creditors how well you manage credit. When you have a fairly low credit utilization ratio, that suggests you can manage your credit and avoid overspending. 

While credit utilization is one of the most important factors in your credit score, it’s also among the easiest to change. Lower your balances, increase your credit limits, or both, and you can see credit score improvement in the short term. 

How Long Does a High Credit Card Utilization Affect Your Credit Score?

The great news is credit card utilization is easy to bounce back from, compared to other major score factors such as late payments, which will stay on your credit for up to 7 years.

Credit utilization depends on your balances and credit limits in any particular statement period, so this factor changes each month and doesn’t follow you long-term.

When you are able to pay down a high credit card balance and bring down your credit utilization ratio, your credit rating could bounce back as soon as the new lower balance is reported — so you could be just a billing cycle away from better credit.

How To Lower Your Credit Card Utilization

The basic ways to lower your credit card utilization are to spend less on your credit cards and increase your credit limits. Let’s look some more at your options:

  • Limit Spending: Spend within your budget and an amount that places your usage within 4% to 30% of your credit limit. On a credit card with a $10,000 credit limit, that’s $700 to $3,000.
  • Pay More Than Your Minimum Payment: Paying most or all of your credit card balance each month will minimize the balance you’ll roll over to get reported to credit bureaus the next month.
  • Ask for an Increase in Your Credit Limit: You may qualify for a higher credit limit, which will give you more room to spend and still keep a good credit utilization ratio. Credit card issuers may automatically consider your account for a credit line increase, but you can request an increase, too.
  • Keep Old Credit Card Accounts Open: Maintaining old credit card accounts can not only keep the age of the account on your credit report (which can increase the average age of accounts and therefore increase your credit score) but also keep the available credit factored into your overall credit utilization ratio. If you have an annual fee on an old card you’re not using anymore, consider calling the issuer to downgrade your account to a no-annual-fee card.
  • Open a New Credit Card: A new credit card account can increase your overall credit line. You can also direct spending to the new account if you’re using too much available credit on other credit card accounts.
  • Pay Bills Before Your Statement Closes: If you need to use a lot of your available credit, but don’t want your credit score to take a hit during high-spending months, you can pay your bill early before the statement closing date to reduce the balance that’s reported to the credit bureaus.
  • Manage Credit Card Debt: The higher your balances, the higher your credit card utilization ratio. It’s best to not carry any balances month to month. Consider a balance transfer card or personal loan to help you manage debt.
  • Monitor Your Credit: Stay on top of your credit report and score with free tools, which can help you see how much you’re spending and calculate your credit utilization ratio for you.

Final Thoughts

Credit card utilization — or how much of your credit card’s limit you’re using — is a major factor in your credit score. In general, a low credit utilization ratio of 4% to 30% is best. 

If you’re having trouble hitting this mark, consider asking for a credit line increase, opening a new credit card, or lowering your credit card spending. And it’s always a good idea to stay on top of your credit history with free tracking and monitoring tools.

Keep in mind that while credit card utilization is an important factor in your credit score, it’s just one of several. Making on-time payments consistently is the most important thing you can do for your credit, but managing balances to keep a low credit utilization rate can help, too.

Frequently Asked Questions

Does credit utilization matter if you pay in full?

Credit utilization matters even if you pay in full because it’s not your revolving balance that’s reported to the credit bureaus. Instead, credit card companies report your statement closing balance.

If you don't use your credit card does it hurt your credit?

It can hurt your credit if you don’t use your credit card. First, your credit card issuer might opt to close a card you don’t use anymore. If it’s one of your oldest cards, or it has a high credit limit, that could hurt your credit if you lose the age of the account and the available credit. 

But even if the account remains open and unused, it’s still not great for your credit. Credit scoring models don’t favor unused credit cards because it doesn’t demonstrate your ability to manage credit well.

How much money do I have on my credit card?

You don’t have any money on your credit card — just a credit line that allows you to borrow money. A prepaid card can have money on it, or you can use a debit card attached to a bank account with money.

Is credit utilization per card or total?

Credit utilization can be calculated per card or overall across all of your credit card accounts.

Is there a difference between credit card utilization percentage, credit utilization ratio, and credit card usage percentage?

No. All of these terms are slightly different, but ultimately calculate the same thing: how much of your credit card you’re using compared to the amount of your credit limit.

Jessica Merritt's image

About Jessica Merritt

A long-time points and miles student, Jessica is the former Personal Finance Managing Editor at U.S. News and World Report and is passionate about helping consumers fund their travels for as little cash as possible.

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