Credit Utilization: The 30% That Can Make or Break Your Score
How Much You Owe Isn’t Just a Number—It’s a Power Move in the Credit Game
Understanding Credit Utilization: How Much You Owe
One of the most important—but often misunderstood—factors in your credit score is how much of your available credit you’re using. This is called your credit utilization ratio, and it accounts for 30% of your FICO score.
This guide breaks it down for you.
What Is Credit Utilization?
Your credit utilization ratio is the percentage of your available credit that you're using on revolving accounts, like credit cards.
Formula: (Balance ÷ Credit Limit) × 100
You need to pay attention to two levels:
- Utilization on each individual credit card
- Total utilization across all your credit cards
Aim to keep BOTH under 30%, and under 15% if possible.
Why It Matters
High credit utilization signals to lenders that you may be financially overextended, even if you pay off your balance every month.
Even one maxed-out card can drop your credit score significantly.
Example: A Tale of Two Users
User A: One credit card with a $3,000 limit, $3,000 balance = 100% utilization (bad).
User B: Three cards, each with $5,000 limits. Each has a $1,000 balance = 20% utilization per card, 20% overall (much better).
Same total debt—very different score impact.
Tips for Better Utilization
- Don’t use more than 30% of your credit limit on any one card.
- Keep overall credit utilization under 15% for best results.
- Spread out balances across multiple cards.
- Ask for credit limit increases (but don’t spend more!).
- Avoid closing old cards unless necessary.
What NOT to Do
- Don’t max out your credit cards—even temporarily.
- Don’t carry high balances thinking it helps your score.
- Don’t close cards without understanding the impact on utilization.
Credit utilization is one of the quickest things you can improve to boost your credit score. Stay under control, and you stay in the game.