How much of your credit limit you use is one of the biggest score factors, and one of the quickest to change.
Quick summary
- Credit utilization is your revolving balances divided by your credit limits.
- Scoring models look at your overall ratio and at individual cards.
- Lower is better. Keeping it under 30% is a common guideline, and lower still tends to help more.
- Because it’s based on reported balances, utilization can change from one month to the next.
Credit utilization measures how much of your available revolving credit you’re using. It sits within the “amounts owed” factor, which FICO weights at about 30% of your score.
How it’s calculated
Utilization = total card balances ÷ total credit limits × 100.
| Card | Balance | Limit | Utilization |
|---|---|---|---|
| Card A | $900 | $3,000 | 30% |
| Card B | $100 | $2,000 | 5% |
| Overall | $1,000 | $5,000 | 20% |
Scoring models look at the overall figure and at each card. A single card close to its limit can weigh on your score even if your overall ratio looks fine.
Why the statement date matters
Most card issuers report your balance to the credit bureaus once a month, usually around the statement closing date. If you spend $1,500 and pay it off after the statement arrives, $1,500 is what gets reported, even though you never pay interest.
Quick tip
To lower the balance that’s reported, make a payment a few days before your statement closes. You can find the closing date on your statement or in your card’s app.
What counts as “low”
Keeping utilization under 30% is a widely used guideline. People with the highest scores tend to use much less, often under 10%. There’s no reward for carrying a balance, though, so paying in full is still the goal.
Ways to lower your ratio
- Pay down balances, starting with cards closest to their limits.
- Make more than one payment a month to keep reported balances low.
- Ask for a higher limit on a card you manage well, as long as you won’t spend more. Some issuers use a hard inquiry for this, so ask first.
- Keep older no-fee cards open so their limits stay in your total.
Worth knowing
Utilization has no memory in most scoring models. Once lower balances are reported, the effect on your score can show up within a cycle or two.
Using utilization to your advantage
Because it changes quickly, utilization is the factor to manage before a major application, such as a mortgage or auto loan. Combine low balances with on-time payments, and avoid new hard inquiries in the months before. If high balances come from debt you’re struggling to repay, see our guide to debt management plans.
Reader questions
Does paying in full every month mean zero utilization?
Not necessarily. Card issuers usually report the balance on your statement date, before you pay, so a balance can show even if you never pay interest.
Should I close cards I don’t use?
Closing a card removes its limit from your total, which can raise your utilization. If a card has no annual fee, keeping it open is often better for your score.
Does utilization include loans?
Mainly revolving credit, like credit cards and lines of credit. Installment loans are considered differently.
This article is general information, not financial or legal advice. Scoring models, lender policies and laws change, and state rules vary. Check official sources such as the Consumer Financial Protection Bureau and the Federal Trade Commission, and consider a nonprofit credit counselor for help with your own situation.