What Is Credit Utilization (and the 30% Rule)

Credit utilization is the share of your available credit that you are currently using. It is one of the most influential factors in a credit score — second only to payment history — and, unlike your history, it is something you can change almost immediately.

How it is calculated

Divide your total card balances by your total credit limits. With $2,000 of balances against $10,000 of limits, your utilization is 20%. Scoring models look at both your overall utilization and the figure on each individual card.

The 30% rule

• Keeping overall utilization under 30% is the common guideline; under 10% is better still.
• A single card that is nearly maxed can hurt even if your overall ratio looks fine.
• Utilization has no memory — it is based on your latest reported balances, so it rebounds fast when you pay down.

How to lower it

Pay down balances, of course, but timing helps too: paying before the statement closing date means a lower balance gets reported to the bureaus. Asking for a higher limit, or keeping old cards open, raises your available credit and lowers the ratio without spending less.

Check your utilization and see the impact of paying down a card with the calculators below.