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The Points Guy believes that credit cards can transform lives, helping you leverage everyday spending for cash back or travel experiences that might otherwise be out of reach. That's why we publish a variety of editorial content and card comparisons: to help you find a great card to turn your goals into reality.
Our site may earn compensation when a customer clicks on a link, when an application is approved, or when an account is opened with our partners, and this may impact how or where these products appear. While we don't cover all available credit cards, our editorial team creates and maintains all of the analysis of these cards, and our content is not influenced nor subject to review by any credit card company, bank or partner prior to (or after) publication. Please view our advertising policy and product review methodology for more information.
Michelle Lambright Black, Founder of CreditWriter.com and HerCreditMatters.com, is a leading credit expert with over a decade and a half of experience in the credit industry. She’s an expert on credit reporting and scoring, credit cards, identity theft, budgeting and debt eradication. Michelle is also an experienced personal finance and travel writer. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).
December 2, 2024 • 8 min read
The cards we feature here are from partners who compensate us when you are approved through our site, and this may impact how or where these products appear. We don't cover all available credit cards, but our analysis, reviews, and opinions are entirely from our editorial team. Terms apply to the offers listed on this page. Please view our advertising policy and product review methodology for more information.Editorial disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
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Quick summary
Credit utilization, the percentage of your credit limits currently in use, is a key factor in your credit score, accounting for about 30% of your FICO Score.
Experts generally recommend keeping your utilization below 30%, but lower rates are typically more favorable for your score.
There is no universally perfect utilization rate, though consumers with the highest scores often maintain single-digit utilization.
Using credit responsibly and regularly, rather than not at all, is important for maintaining both your score and account activity.
What to consider
Credit scoring models assess both individual card and overall utilization, based on balances reported at statement closing dates.
Paying your balance in full and possibly multiple times per month can help keep utilization low and avoid interest charges.
Requesting a credit limit increase may reduce your utilization ratio, but check if this triggers a hard inquiry on your credit report.
What you'll miss from the article
Detailed strategies for timing payments and managing balances to optimize your reported credit utilization.
Generated by AI with support from our editorial team.
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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.
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.
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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.
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.
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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.
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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.
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.
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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.
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.
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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.
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.
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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.
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.
By commenting, you agree to our Community Guidelines to help create a positive space for conversation. The responses below are not provided or commissioned by the bank advertiser, our partners, or The Points Guy (“TPG”). They have not been reviewed, approved, or otherwise endorsed by any of these parties. All responses are submitted by individual contributors, and neither the bank advertiser, our partners, nor TPG are responsible for ensuring that all posts and/or questions are answered.
