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Credit utilization

Also called: credit utilization ratio, utilization rate

Credit utilization is the share of your credit card limits that your balances are using: reported balances divided by credit limits, times 100. Credit scoring models look at how close you are to being “maxed out,” so utilization can affect your scores.

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How it works

For one card, divide the balance by the limit and multiply by 100. For several cards, add all the balances, add all the limits, and divide the first total by the second. Averaging the cards’ percentages can give a different and misleading answer when the limits differ. Looking at each card as well as the total helps, because a moderate overall figure can hide one card that is close to its limit.

Utilization moves when either number moves. New purchases raise it, payments lower it, and a lower credit limit raises it even if you have not spent anything. CFPB guidance notes that experts advise keeping your use of credit at no more than 30% of your total credit limit. That is a rule of thumb rather than a threshold that guarantees any particular score.

Utilization is one factor among several; paying on time and the length of your credit history matter too. You do not need to carry a balance or pay interest to get a good score. Closing some cards and moving balances onto one remaining card may hurt a score if it leaves you using a high percentage of your total credit limit.

Try it with your own numbersCredit Utilization CalculatorFree credit utilization calculator. Add each card’s balance and limit to see overall and per-card utilization and the paydown needed to reach 30%.

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Sources and further reading

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.

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