Credit Utilization: Why Your Balance-to-Limit Ratio Matters
Credit utilization is one of the fastest-moving parts of your credit score, and one of the easiest to understand.
What it is
Your credit utilization is how much of your available revolving credit you’re using. If you have $1,000 in balances across cards with $5,000 in total limits, your utilization is 20%.
Why it matters
Scoring models look at both your overall utilization and the utilization on each card. High utilization can signal that you’re stretched thin, so lower is generally better. Many experts suggest staying under 30%, and people with the highest scores often keep it well under 10%.
How to calculate yours
Add up the balances on all your credit cards.
Add up the credit limits on those same cards.
Divide total balances by total limits and multiply by 100.
Ways to lower it
Pay before the statement date. Most issuers report the balance on your statement, so paying early can lower what gets reported.
Spread out balances so no single card is close to its limit.
Ask for a limit increase on a card you already have (check whether it causes a hard inquiry first).
Keep old cards open so you don’t lose their available credit.
Get added as an authorized user on a high-limit, low-balance card, which adds available credit to your report.
Because utilization is based on what’s reported now, changes can show up within a billing cycle or two. See how Boostly works.
