Is 30% credit card utilization the magic number?
Editor's Note
As a credit card rewards enthusiast, you already know that keeping your credit score in great shape is important. Good credit is essential if you want to keep yourself in a position to qualify for the best credit card offers when they become available.
Keeping a close eye on your credit card utilization ratio is one strategy you can use to maintain a good credit score. Credit utilization — or the relationship between your credit card balances and limits — is an important factor in your score. In fact, 30% of your FICO Score is largely (though not entirely) based on your credit card balance-to-limit details.
A lower percentage is generally better in this area. However, there is some debate about what the perfect credit utilization ratio looks like.
Many financial experts recommend keeping your utilization rate below 30% if you want to earn optimal credit scores, but there may be more to the credit utilization story. Here's what you need to know.
Related: How to check your credit score for free
What is credit utilization?
Credit utilization describes the percentage of your credit card limits that are in use. Let’s say you have a single credit card with a $10,000 credit limit. If the balance on your account is $5,000, your utilization rate is 50%. In other words, you are using (or utilizing) 50% of your credit limit.
Credit scoring models, such as FICO and VantageScore, look at credit utilization in two ways when calculating your credit score:
- Individual credit card utilization measures how much of your credit limit you’re using on each of your credit cards.
- Aggregate credit card utilization measures the overall credit limit percentage you’re using on all of your credit cards combined.
With both measurements above, it’s not the real-time balance on your credit cards that matters. Rather, credit scoring models base your credit utilization rates on the balance and limit details that appear on your credit report. Card issuers usually update that information once a month — around the time they issue your monthly statement.
Related: How credit scores work
Is 30% credit utilization a magic number?
In short, no. A Google search about “credit utilization” or “revolving utilization” produces dozens of articles suggesting that you should keep your credit utilization ratio at or under 30% to optimize your credit scores. However, this isn't necessarily the case.
Indeed, lower credit utilization rates are generally better for your credit score, but staying under the 30% utilization threshold might not be enough to boost your score.
What FICO has to say about credit card utilization
Can Arkali, senior director of scores and predictive analytics with FICO, confirmed that using a low percentage of your available credit can have a positive impact on your FICO score. However, Arkali added that "there is nothing ‘optimal or significant’ about 30% credit card utilization.”
But generally speaking, FICO scoring models consider a 30% credit card utilization rate less risky than a 50% utilization percentage. As a result, you’d likely see a 30% utilization rate lead to a better score than what you’d see at a higher threshold. Still, a 30% utilization would be viewed less favorably than a lower utilization rate.
What VantageScore has to say about credit card utilization
VantageScore, meanwhile, does recommend keeping your utilization level at or below 30%. However, the company doesn’t go as far as to state that 30% is the perfect utilization percentage.
Jeff Richardson, senior vice president of marketing and communications for VantageScore Solutions, said the impact of any single credit score factor, like utilization, depends on the overall make-up of that person’s credit profile.
“A person with many delinquencies might not be impacted by going over 30% [credit utilization] as much as someone with a pristine credit record,” Richardson said. “That said, models differ, and in general, it is best to keep your utilization rate below 30% and to maintain that positive behavior over time.”
VantageScore's website also notes that consumers with the highest credit scores typically have single-digit utilization rates.
Related: Your next credit card approval is in the hands of these 3 agencies
Is 0% credit utilization best?
While a low utilization rate is good, a 0% ratio would mean not using your credit cards at all, which isn’t a great approach either.
“In some cases, a low credit card utilization will have a more positive impact on your FICO Score than not using any of your available credit at all. Having a low utilization indicates you are actively using credit in a responsible manner," Arkali said.
If you don’t use a credit card on a regular basis, you could encounter other problems, too. For example, your card issuer might lower your credit limit, and in some cases, your credit card company might opt to close your account altogether due to inactivity.
Related: Why never using your card may cause you to lose it
What is the perfect credit utilization ratio?
Unfortunately, there’s no perfect credit utilization ratio. A 1% credit utilization might be the best percentage to aim for since it’s a cross between showing activity on your account and keeping your utilization rate as low as possible. However, maintaining 1% utilization on your credit report likely isn’t a realistic goal.
Remember, it isn’t the real-time balance on your account that matters where credit scoring is concerned. It’s the balance and the limit that shows up on your credit report.
Yes, you could have a 1% utilization rate on your credit card when your billing cycle ends. By doing so, you might even end up with 1% utilization on your credit report for the upcoming month. However, the timing is sensitive, and this strategy has a lot of room for error.
“There are no hard and fast rules for an ideal credit card utilization,” Arkali said. However, he did mention that recent FICO research shows that consumers with the highest credit scores (the top 25% with FICO Scores above 795) use an average of 7% of their credit card limits.
Related: 3 real ways to boost your credit score in 30 days
How to decrease your credit utilization
When it comes to credit cards, it’s best to pay your full statement balance every month. This good habit can save you money on interest fees and protect your credit at the same time. In fact, paying your balance in full is TPG’s number one credit card commandment.
If you want to keep your credit utilization rate low to maximize your credit scores, there are a few strategies to try. First, consider paying your credit card bill multiple times per month. This habit also helps you maintain a lower account balance and utilization rate.
You can also call your credit card issuers (or log into your account online) to determine the statement closing date on each of your cards. If you pay your balance down before this date (and leave it there until afterward), you should end up with low utilization on the account the next time your card issuer sends an update to the credit bureaus.
But be sure to pay attention to your credit card bill when it arrives. You may still need to make another payment by the due date on your account to avoid interest charges.
Finally, you may want to consider asking for an increase to your existing credit limits. As long as you don’t spend additional money on the card, higher limits can lower your utilization since your outstanding balance is spread out over a larger line of credit. However, be sure to verify that requesting an increase won’t lead to a hard inquiry on your credit report.
Related: How to build credit
Bottom line
While you've likely heard the advice to keep your credit utilization at or below 30%, there's no rule to that specific number. Use your credit cards, but aim to keep your credit utilization low to have the best chance at boosting your credit score.
Also, remember that your credit utilization is just one factor in your overall credit score calculation. To have a high score, consistently practice good credit habits like paying off your credit card balances in full and on time each month as well as keeping your credit utilization rate low.
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- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
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- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
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- Annual Fee is $325.
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Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.