Credit Utilization: What It Is and How It Affects Your Score
The short answer: credit utilization is the share of your credit card limits you are using. Divide the balances on your cards by their limits: $1,000 owed on $3,000 of limits is 33%. FICO looks at it for each card and for all your cards together, and lower reported utilization can help. It sits inside the "amounts owed" part of a FICO Score, about 30% of the score, which is why paying cards down is one of the most direct ways to work on your score.
Credit utilization calculator
Enter each card's balance from its last statement and its credit limit. Nothing you type leaves this page.
Estimates only. Scoring models use the balances and limits on your credit report, which can differ from what your card's app shows today. The "pay before your statements close" amounts assume your issuer reports the statement balance; reporting dates vary by issuer.
How credit utilization is calculated
There are two numbers, and FICO says its scores look at both: your overall utilization and the highest utilization on any one card.
- Per card: that card's balance divided by its limit. $850 on a $1,000 limit is 85%.
- Overall: all your card balances added up, divided by all your limits added up. With a second card at $150 on a $2,000 limit, the overall is $1,000 of $3,000, about 33%.
Those two cards are the default example in the calculator above. The overall number looks fine, but one card is nearly maxed out, and that card counts on its own. Paying $550 on the first card before its statement closes brings it to 30%, and the overall to about 15%.
Which accounts count matters too. According to FICO, its scores use the credit card accounts on your credit report for utilization, generally leave charge cards out of the revolving utilization calculation, and generally leave home equity lines of credit out as well. Car loans, student loans and mortgages are installment loans; FICO looks at how much of those you still owe in the amounts owed category, but they are not part of the card utilization ratio.
How much utilization affects your score
FICO groups what is on your credit report into five parts: payment history 35%, amounts owed 30%, length of credit history 15%, new credit 10% and credit mix 10%. Utilization is a big piece of amounts owed. FICO's own explanation is that using a high percentage of your available credit looks like being close to maxed out, which can hurt your scores, while using a low percentage can help.
Two things make utilization different from the rest of the score:
- It can change quickly. The FTC says a credit bureau can report most accurate negative information, such as late payments, for seven years. Utilization is worked out from the balances on your report, so a lower balance can count once your card issuer reports it. Some newer models, such as FICO Score 10 T, also look at "trended data", your balances over the previous 24 months or longer, so past balances are not ignored by every model.
- You do not have to carry a balance. FICO notes that card issuers generally report your balance before the bill is due, so there is no need to pay interest to "show activity". Paying in full every month is fine for your score.
Is 30% credit utilization good?
You will see "keep it under 30%" everywhere. FICO's own pages say some people recommend keeping each card and your overall ratio under 30%, but that 30% is not a line that decides good or bad credit. In FICO's numbers, people with 850 scores have an average overall utilization of about 4.1%.
Thirty percent is a commonly discussed guideline, not a FICO scoring cutoff. Lower reported utilization can help, but the effect depends on the scoring model and overall credit profile. You do not need to carry interest-bearing debt to build credit. You do not need to obsess over it when nobody is checking your credit; it matters most in the month or two before you apply for a mortgage, a car loan, a balance transfer card or a consolidation loan.
The statement date trap
Most people never notice this one. FICO says card issuers generally report your balance before the bill is due, and to the best of our knowledge that is usually the balance on your statement, not what you owe after you pay it. If you put $900 on a $1,000 card during the month and pay it in full on the due date, you paid no interest, and the report may still show 90%.
If your issuer normally reports the statement balance, paying before the statement closes may reduce the balance reported to credit bureaus. Reporting dates vary by issuer, so confirm your issuer's practices. Then pay the rest by the due date as usual. Our guide on how to lower credit utilization fast walks through four ways to do it, with a worked example.
What common debt moves do to your utilization
| Move | What happens to utilization |
|---|---|
| Paying cards down | Goes down card by card. Every payment lowers both numbers. |
| Closing a paid-off card | Can go up. FICO says closing a card with no balance removes its limit from your total, which can raise your overall ratio. |
| A balance transfer to a new card | The new card adds its limit to your total, so overall can drop. But the new card can start near its limit, which raises your highest single card. |
| A consolidation loan that pays off your cards | Card utilization can drop a lot, because the debt moves to an installment loan. It only stays down if the cards stay paid off. |
| Asking for a higher limit | Goes down if spending stays the same. Only worth it if the extra room is not spent. |
Before a transfer or a loan, check the money side as well as the score side. The balance transfer calculator shows whether the fee is worth it, and the debt consolidation calculator compares a loan with paying your cards as they are.
Lowering utilization by paying off debt
The lasting way to lower utilization is to owe less. Any payoff plan that puts extra money on your cards does it. The debt snowball method clears the smallest balances first, which shrinks the number of cards carrying a balance quickly. Paying the highest rate first saves the most interest. The credit card payoff calculator shows how long one card takes, and the snowball vs avalanche calculator plans all of them together.
If a card's utilization is high because you cannot keep up with the payments, the score is not the first problem to solve. Our page on debt relief options compares the honest ways out, including credit counseling.
How to check your own numbers
Your credit report shows each card's reported balance and limit. You can get your reports free from each of the three nationwide credit bureaus at AnnualCreditReport.com. The FTC says it is the only website authorized to fill orders for the free reports you are entitled to by law, and that all three bureaus now let you check your report there once a week for free. If a limit or balance on your report is wrong, the CFPB explains how to dispute an error on your credit report.
Questions about credit utilization
What is a good credit utilization ratio?
There is no single cutoff. Many people aim to stay under 30% on each card and overall, but FICO says 30% does not decide good or bad credit, and people with 850 FICO Scores average about 4.1% overall utilization. Lower reported utilization can help, but the effect depends on the scoring model and your overall credit profile.
Does credit utilization count per card or in total?
Both. FICO says its scores consider your overall utilization and the highest utilization on individual cards, so one maxed-out card can matter even when your total is low.
Do I need to carry a balance to build credit?
No. FICO notes that card issuers generally report your balance before the bill is due, so you can pay in full every month, pay no interest, and still have your card use show up.
Does closing a credit card hurt my utilization?
It can. Closing a paid-off card removes its limit from your total, which can raise your overall utilization if you carry balances on other cards.
Do car loans and mortgages count toward credit utilization?
Not toward the card utilization ratio. They are installment loans; FICO looks at how much you still owe on them separately within amounts owed. FICO also says it generally leaves home equity lines of credit out of utilization.
More on this topic: Credit Score: How It Works and What Moves It While You Pay Off Debt