Credit utilization: what it is and how it affects your score

Credit utilization sounds technical, but the idea is simple: how much of your available credit card credit are you using right now? It is one of the few parts of your credit score that can change quickly, which makes it worth understanding. Here is how it works, where the numbers come from and how to check what lenders see.

What credit utilization means

Your credit utilization ratio is the balance you owe on revolving accounts, such as credit cards, divided by your total credit limits on those accounts. Revolving means you can borrow, repay and borrow again up to a limit. Installment loans, like a car loan or student loan, have a fixed payoff schedule instead, and the utilization ratio described here is about revolving accounts.

The formula is:

Utilization = revolving balances ÷ revolving credit limits × 100

For example, if you owe $500 on a card with a $2,000 limit, your utilization on that card is 25%.

How much it matters to your score

FICO publishes a general breakdown of what goes into its scores. According to myFICO, the five categories are weighted roughly like this:

Credit utilization falls under amounts owed. myFICO says a high share of available credit in use can suggest you are stretched thin, while keeping it low can help. The amounts-owed category also includes other things, such as your total debt and how many accounts carry a balance, as myFICO's page on amounts owed explains.

Keep in mind that you don't have just one score. The CFPB notes that scores vary by scoring model, the data used and the date they are calculated. It also lists "how much of your available credit you're using" among the factors scoring models typically consider. The percentages above are FICO's general guide, not a formula for your personal score.

Overall utilization vs. per-card utilization

Scores don't only look at the big picture. myFICO says a FICO Score considers both your overall utilization rate and the highest utilization rates on specific revolving accounts.

Here is a hypothetical example with two cards:

Your overall utilization is 16% ($800 ÷ $5,000). But Card A on its own is at 60%. Because per-card utilization can count too, moving some spending to the card with more room, or paying down the nearly maxed-out card first, can change how your profile looks even if your total debt stays the same.

Is there a "magic number"?

You may have heard that you should stay under 30%. myFICO addresses this directly: it says some people recommend keeping individual and overall utilization under 30%, but that "the 30% point doesn't determine who has good or bad credit." It adds that a lower rate could be even better, and points out that people with 850 FICO Scores have an average overall utilization of about 4.1%.

myFICO also says a low utilization rate might be better for your FICO Score than 0%. In other words, using a card lightly and paying it off can look different from not using credit at all.

Statement date vs. due date

This is where many people get surprised. Your credit card has two key dates each month:

• Statement closing date: the day your billing cycle ends and your statement balance is set.
• Payment due date: the deadline to pay at least the minimum without a late payment.

According to myFICO, "the total balance on your last statement is generally the amount that will show in your credit report." So even if you pay your card in full every month, your report may show a balance. myFICO also notes that card issuers generally report your account information before your bill is due, and that FICO uses the balances and limits on your credit report, which may differ from the current balance you see online.

What this means in practice: if you run a large balance during the month and pay it off on the due date, the reported balance may still be high. Paying part of the balance before the statement closes can lower what gets reported. myFICO describes paying early as something that can help if you regularly use much of your available credit.

Ways people lower their utilization

There is no one right move for everyone, but common options include:

• Pay before the statement closes. This reduces the balance that is likely to be reported.
• Make more than one payment a month. Splitting payments can keep the running balance lower.
• Spread spending across cards. This can avoid one card showing very high per-card utilization.
• Pay down the highest-utilization card first. That addresses the per-card measure as well as the total.
• Think before closing old cards. Closing a card removes its limit from your total, which raises your overall ratio if your balances stay the same.

Each of these has trade-offs, and none of them matters as much as paying on time. Payment history is the largest factor in FICO's breakdown.

Check what your credit reports show

Your utilization is calculated from what is on your credit reports, so it's worth checking them. The CFPB says you can get a free report from each of the three nationwide credit reporting companies (Equifax, Experian and TransUnion) once a week at AnnualCreditReport.com, or by calling (877) 322-8228.

Weekly access started in 2020 as a temporary pandemic measure. In 2023, the three companies made it permanent, as the New Hampshire Banking Department reported. It also advised using AnnualCreditReport.com, since other sites may charge fees or be fraudulent.

When you review a report, look at the balance and credit limit listed for each card. If a limit is missing or wrong, your utilization may look higher than it really is. The CFPB explains that you can dispute errors in writing with both the credit reporting company and the company that supplied the information, and that a dispute to the credit reporting company should include copies of documents that support it.

How SpendySaver helps

The Insights page gives you a Financial Health Score from 0 to 100 based on six everyday money habits. It is an educational measure, not a credit score, and SpendySaver doesn't monitor your credit. It can still help you spot the spending patterns that tend to push card balances up before your statement closes.