Credit Utilization: How to Calculate It
By Beacon · Updated · 3 min read
Credit utilization compares your reported revolving credit balances with your credit limits. Divide the balance by the limit and multiply by 100. Lower utilization can help a credit score, but there is no percentage that guarantees a particular score or approval.
Calculate one card first
A card with a reported $600 balance and a $3,000 limit has 20% utilization: $600 ÷ $3,000 × 100. The unused $2,400 is not the denominator. Using that number would answer a different question.
The ratio can change when the balance changes or when the credit limit changes. In the same example, a limit reduction to $1,500 would make the ratio 40% even if no new purchase occurred.
Sources: CFPB: Your Money, Your Goals financial empowerment toolkit (credit utilization)
Add balances and limits before dividing
For a combined ratio, add the balances and divide by the sum of the limits. Do not average the individual percentages unless the limits happen to be equal.
The combined number can hide a heavily used card. Looking at both levels helps you understand the information in the report, without treating a single ratio as a prediction of your score.
| Card | Reported balance | Limit | Utilization |
|---|---|---|---|
| A | $900 | $1,000 | 90% |
| B | $100 | $4,000 | 2.5% |
| Combined | $1,000 | $5,000 | 20% |
Sources: CFPB: Your Money, Your Goals financial empowerment toolkit (credit utilization)
A payment date and a reporting date do different jobs
The amount in your credit report may differ from the live balance in your card app. Payments, purchases, and reporting happen on different dates. A balance can be paid after it was reported and still appear in a score based on that earlier information.
The due date tells you when payment is required. The statement closing date marks the end of a billing cycle. Neither should be assumed to be every issuer’s reporting date. Ask the issuer about its process if timing matters for an upcoming application.
Avoid turning a guideline into a guarantee
Credit scores use more than utilization. Payment history, the accounts involved, and the scoring model also matter. A move from one percentage to another does not promise a specific point increase, and a relatively low ratio does not erase late payments.
Carrying a balance and paying interest is not required to build a credit history. Keep payment obligations separate from efforts to understand a score. Reducing reported usage is not a reason to miss another bill or spend money solely to create activity.
Sources: CFPB: Understand your credit score · CFPB: Paying a credit card balance and your score
Calculators for this guide
Terms in this guide
Sources and further reading
- CFPB: Your Money, Your Goals financial empowerment toolkit (credit utilization)
- CFPB: Understand your credit score
- CFPB: Paying a credit card balance and your score
Examples are illustrative and focus on U.S. personal finance. This guide is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.
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