Create a free account to save your progress, earn certificates, and pick up where you left off.
Create Free Account Log InKeep Credit Utilization Low
Use Less Than 30% of Your Available Credit
What You'll Learn
- Understand what credit utilization is and why it matters
- Calculate your current utilization ratio
- Learn strategies to lower your utilization and boost your score
What Is Credit Utilization?
Credit utilization is the percentage of your available credit that you're currently using. It's the second-most important factor in your credit score (30% of your score).
Think of it this way: if lenders give you $10,000 in credit and you're using $9,000 of it, they see you as financially stretched—maybe even desperate. But if you're only using $1,000, you look responsible and low-risk.
The Utilization Formula
Utilization = (Total Credit Card Balances ÷ Total Credit Limits) × 100
Example: You have three credit cards with a combined limit of $10,000. Your total balance across all cards is $2,500.
($2,500 ÷ $10,000) × 100 = 25% utilization
Why Utilization Matters
Lenders use your utilization ratio to gauge your financial health. High utilization suggests you're relying heavily on credit—which makes you a riskier borrower.
🟢 Low Utilization (Under 30%)
Click to see the impact
Low Utilization = Good for Your Score
What it signals: You're using credit responsibly. You have plenty of available credit and aren't maxing out your cards.
Impact on score: Positive—helps your score.
Best practice: Keep utilization under 30%. Under 10% is even better.
People with the highest credit scores (800+) typically have utilization under 10%.
🟡 Moderate Utilization (30-50%)
Click to see the impact
Moderate Utilization = Hurts Your Score
What it signals: You're using a significant portion of your available credit. Lenders see this as a warning sign.
Impact on score: Negative—lowers your score.
What to do: Make paying down balances a priority. Even small reductions help.
🔴 High Utilization (Over 50%)
Click to see the impact
High Utilization = Major Score Damage
What it signals: You're financially overextended. Lenders see you as high-risk.
Impact on score: Severely negative—significantly lowers your score.
What to do: Aggressively pay down balances. Consider a balance transfer or debt consolidation to lower utilization quickly.
The 30% Rule
As a general guideline, keep your credit utilization below 30% at all times. This single habit can boost your score significantly.
Even better: Aim for under 10% if you want an excellent score (750+).
Calculate Your Credit Utilization
Let's figure out your current utilization ratio. Use this calculator to see where you stand:
Credit Utilization Calculator
Enter your credit card information below:
Strategies to Lower Your Utilization
If your utilization is too high, here are proven strategies to bring it down:
Strategy 1: Pay Down Balances
Click to learn how
Pay Off Your Credit Card Debt
The most direct way to lower utilization: reduce your balances.
How to do it:
- Focus extra payments on the card with the highest utilization first
- Make multiple payments per month (not just one at the due date)
- Use windfalls (tax refunds, bonuses) to knock down balances
Impact: Immediate—your score improves as soon as the lower balance is reported.
Strategy 2: Request Limit Increases
Click to learn how
Increase Your Available Credit
If you can't pay down balances quickly, increase your credit limits to lower your utilization ratio.
How to do it:
- Call your credit card company or request online
- Ask for a credit limit increase (usually granted if you've been paying on time)
- Important: Don't spend more just because your limit went up!
Example: $2,000 balance on $5,000 limit = 40% utilization. Increase limit to $8,000 = 25% utilization.
Strategy 3: Time Your Payments
Click to learn how
Pay Before the Statement Closes
Your credit card company reports your balance to the bureaus once a month—usually on your statement closing date, not your due date.
How to do it:
- Find your statement closing date (call your card company or check online)
- Make a payment a few days before that date
- This lowers the balance that gets reported, lowering your utilization
Pro tip: Even if you can't pay in full, paying down the balance before the closing date helps your score.
Strategy 4: Spread Out Charges
Click to learn how
Use Multiple Cards to Lower Per-Card Utilization
Utilization is calculated per card and overall. If one card is maxed out, it hurts your score even if others are at zero.
How to do it:
- Spread charges across multiple cards instead of using just one
- Keep each card under 30% utilization individually
Example: Instead of $3,000 on one $5,000-limit card (60% utilization), put $1,500 on two different cards (30% each).
Strategy 5: Keep Cards Open
Click to learn why
Don't Close Old Credit Cards
When you close a credit card, you lose that available credit—which increases your utilization ratio.
Example:
- Before: $2,000 balance, $10,000 total limits = 20% utilization
- After closing a $5,000-limit card: $2,000 balance, $5,000 total limits = 40% utilization
What to do instead: Keep old cards open and use them occasionally (small purchase, pay in full) to keep them active.
Strategy 6: Open a New Card (Carefully)
Click to learn when
Add Available Credit With a New Card
Opening a new credit card increases your total available credit, lowering your utilization.
When this makes sense:
- You're not planning to apply for a mortgage or car loan soon (the hard inquiry will temporarily lower your score)
- You can resist the temptation to spend more
Caution: Only use this strategy if you're disciplined. Don't open new cards just to rack up more debt.
Per-Card Utilization Matters Too
Your credit score looks at both your overall utilization (across all cards) and your per-card utilization (each individual card).
Don't Max Out One Card
Even if your overall utilization is low, maxing out a single card hurts your score. Try to keep every card below 30% individually.
Bad: Card A at 100% utilization, Card B at 0% (average: 50%)
Better: Card A at 25% utilization, Card B at 25% (average: 25%, no maxed cards)
Action Step: Calculate and Improve Your Utilization
This week, take these steps:
- Calculate your utilization using the calculator above (or manually: add up all balances and all limits, then divide)
- If it's over 30%: Make an extra payment this week to bring it down
- If it's under 30%: Keep it there! Set a reminder to check monthly
- Find your statement closing date for each card and add it to your calendar—this is when your balance gets reported
Lowering your utilization can boost your score by 20-50 points or more—sometimes within a month.
You're Building Excellent Credit Habits
You now understand the second-most important factor in your credit score. Combined with on-time payments, keeping utilization low will put you on the path to an excellent score.
Next lesson: Learn the credit traps to avoid—mistakes that can undo all your hard work.