What Is a Credit Utilization Rate?

shadow of hand hovering over the screen of a tablet

Your credit utilization rate, sometimes called your credit utilization ratio, is the amount of revolving credit you're currently using divided by the total amount of revolving credit you have available. In other words, it's how much you currently owe divided by your credit limit. It is generally expressed as a percent. For example, if you have a total of $10,000 in credit available on two credit cards, and a balance of $5,000 on one, your credit utilization rate is 50% — you're using half of the total credit you have available. You can calculate an overall credit utilization rate as well as a rate for each of your credit accounts (called your per-card ratio).

Credit scoring models often consider your credit utilization rate when calculating a credit score for you. They can impact up to 30% of a credit score (which makes them among the more influential factors), depending on the scoring model being used.

A low credit utilization rate shows you're using less of your available credit. Credit scoring models generally interpret this as an indication you're doing a good job managing credit by not overspending, and keeping your spending in check can help you reach higher credit scores. Having higher credit scores can make it easier to secure additional credit, such as auto loans, mortgages and credit cards with favorable terms, when you need it.

Revolving Credit

Credit utilization rates are based solely on revolving credit — essentially, your credit cards and lines of credit. The rates do not include installment loans like your mortgage or an auto loan. Those factor into your credit in a different way.

"Revolving credit" is called that because it doesn't have a pre-determined end date; the amount you owe carries over (revolves) from month to month. Every month, you can borrow against your credit limit, reducing the amount of credit you have available, repay all or some of it, and borrow against the available amount again.

As long as your account is in good standing and you haven't reached your credit limit, you'll be able to continue borrowing with your credit card or line of credit. Every month, you'll pay interest on the amount of credit you're using. If you pay your credit card balances in full every month, you won't accrue any interest charges and your credit utilization rate will be low.

Installment loans like mortgages and auto loans factor into a different rate — your debt-to-income ratio. Mortgage companies and vehicle lenders often use your debt-to-income ratio to understand how much of your total annual income goes toward paying off installment debt. While many lenders use your debt-to-income ratio to make decisions and may consider it to be a valuable indicator, it's not used to calculate your credit scores.

Per-card vs. Total Utilization

While your credit utilization rate is generally a comparison of total credit used to total credit available, the amount of credit you're using on individual cards is also important. Your per-card credit utilization rate is calculated in the same basic way as your overall utilization rate, except it compares the balance of an individual credit card to available credit on the same card.

Let's go back to our earlier example of two credit cards with a total credit limit of $10,000, of which, you're using $5,000. Your total credit utilization rate is 50 percent. If each card has a credit limit of $5,000 and you owe $3,000 on one and $2,000 on the other, your per-card utilization rates would be 60% and 40%, respectively.

What is a Good Credit Utilization Rate?

In a FICO^® Score^☉ or score by VantageScore, it is commonly recommended to keep your total credit utilization rate below 30%. For example, if your total credit limit is $10,000, your total revolving balance shouldn't exceed $3,000. Generally, a low credit utilization ratio is considered an indicator that you're doing a good job of managing your credit responsibilities because you're far from overspending. A higher rate, however, could be a flag to potential lenders or creditors that you're having trouble managing your finances.

Balance Reporting and Credit Utilization

Every month when you pay your credit card bill, you're affecting your credit utilization rate. If you make a substantial payment that you know will bring your rate under 30%, you may be frustrated if you don't see your credit score improve immediately.

It's important to understand that your credit utilization rate — and by default your credit scores — can be affected by the timing of when a credit card company updates your balance information with the credit reporting agencies. Typically, credit card companies update this information every 30 days at the end of your billing cycle. It's possible that you could make a payment on one of your credit cards but not see the impact on your credit scores for a few weeks, when the credit card company updates your balance information with the credit reporting agencies.

Should You Open Credit Cards to Improve Your Credit Utilization Rate?

You can manage your credit utilization ratio in several ways, including:

Paying credit card balances in full every month. Remember that even if you're not able to get completely 'back to zero' each month, keeping your balances as low as possible is still helping you move the right direction and avoid racking up excessive debt.
Keeping open credit accounts that have zero balances, even if you don't intend to use them.
Requesting a credit limit increase from a credit card issuer.
Opening new credit accounts.

This last option, however, has the potential to negatively affect your score in the short term. Credit scoring models also consider the number of times new creditors — such as a new credit card company — have looked at your credit report within a certain time frame. Too many inquiries in a short period of time can influence your credit scores. In addition, having too many credit cards compared to your overall credit mix may also be a risk factor and could negatively impact your credit scores. You know yourself best, and if having open cards with high limits could prove too tempting for you to overspend, carefully consider the right number of accounts for you based on your personal strengths and financial abilities.

How Closing a Credit Card Can Affect Your Credit Utilization Rate

Just as opening new cards can have a short-term negative affect, so can closing existing accounts. When you close a credit card account, you're reducing your total credit limit. If you owe nothing on any credit cards, your credit utilization rate is zero, and lowering your total available credit won't change that rate. However, depending on the age of the credit card account that is closed, your length of credit history could be negatively impacted and affect your score.

If you do carry a balance and reduce your total available credit by closing a zero-balance account, you could affect your utilization rate. For example, say you have $10,000 in available credit on two cards, with a credit limit of $5,000 on each, and owe $5,000 on one. Your credit utilization rate is currently 50%. You decide to close the zero-balance card, which lowers your total available credit to $5,000. Now your credit utilization rate is 100%!

Your credit utilization rate is just one of many factors that can affect your credit scores. It's important to understand how it works, and how you can manage credit utilization to make it work for you. To see how your credit history may look to lenders and others, you can check your credit report from Experian.

FICO is a registered trademark of the Fair Isaac Corporation.

Learn More About Credit Utilization

How Much Credit Should I Use?
Keeping your credit card balances well below their borrowing limits can help you avoid reductions in your credit scores.
What Is the Best Credit Utilization Ratio?
A low credit utilization ratio is best for your credit scores, but some utilization is better than none. Here are some tips for keeping it low.
How Much Available Credit Should I Have on My Credit Cards?
Your available credit on your credit cards can have a big impact on your credit score. Here's what to consider and how to find the best level for you.
How to Calculate Credit Card Utilization
Credit card utilization ratios are based on your card’s balance and credit limit in your credit report. Here’s what you need to know to improve your scores.
What Should My Credit Card Utilization Be?
Your credit utilization ratio should be 30% or less, and the lower you can get it, the better it is for your credit score.
Five Ways to Keep Your Credit Utilization Low
Your credit utilization ratio is one of the most important factors of your credit score—and keeping it low is key to top scores. Here’s how to do it.
How Utilization Rate Affects Credit Scores
Dear Experian,I have been led to believe that a component of one's overall credit score is the ratio of current credit card balances to one's total available credit. If...

How Good Is Your Credit Score?

300 credit score 301 credit score 302 credit score 303 credit score 304 credit score 305 credit score 306 credit score 307 credit score 308 credit score 309 credit score 310 credit score 311 credit score 312 credit score 313 credit score 314 credit score 315 credit score 316 credit score 317 credit score 318 credit score 319 credit score 320 credit score 321 credit score 322 credit score 323 credit score 324 credit score 325 credit score 326 credit score 327 credit score 328 credit score 329 credit score 330 credit score 331 credit score 332 credit score 333 credit score 334 credit score 335 credit score 336 credit score 337 credit score 338 credit score 339 credit score 340 credit score 341 credit score 342 credit score 343 credit score 344 credit score 345 credit score 346 credit score 347 credit score 348 credit score 349 credit score 350 credit score 351 credit score 352 credit score 353 credit score 354 credit score 355 credit score 356 credit score 357 credit score 358 credit score 359 credit score 360 credit score 361 credit score 362 credit score 363 credit score 364 credit score 365 credit score 366 credit score 367 credit score 368 credit score 369 credit score 370 credit score 371 credit score 372 credit score 373 credit score 374 credit score 375 credit score 376 credit score 377 credit score 378 credit score 379 credit score 380 credit score 381 credit score 382 credit score 383 credit score 384 credit score 385 credit score 386 credit score 387 credit score 388 credit score 389 credit score 390 credit score 391 credit score 392 credit score 393 credit score 394 credit score 395 credit score 396 credit score 397 credit score 398 credit score 399 credit score 400 credit score 401 credit score 402 credit score 403 credit score 404 credit score 405 credit score 406 credit score 407 credit score 408 credit score 409 credit score 410 credit score 411 credit score 412 credit score 413 credit score 414 credit score 415 credit score 416 credit score 417 credit score 418 credit score 419 credit score 420 credit score 421 credit score 422 credit score 423 credit score 424 credit score 425 credit score 426 credit score 427 credit score 428 credit score 429 credit score 430 credit score 431 credit score 432 credit score 433 credit score 434 credit score 435 credit score 436 credit score 437 credit score 438 credit score 439 credit score 440 credit score 441 credit score 442 credit score 443 credit score 444 credit score 445 credit score 446 credit score 447 credit score 448 credit score 449 credit score 450 credit score 451 credit score 452 credit score 453 credit score 454 credit score 455 credit score 456 credit score 457 credit score 458 credit score 459 credit score 460 credit score 461 credit score 462 credit score 463 credit score 464 credit score 465 credit score 466 credit score 467 credit score 468 credit score 469 credit score 470 credit score 471 credit score 472 credit score 473 credit score 474 credit score 475 credit score 476 credit score 477 credit score 478 credit score 479 credit score 480 credit score 481 credit score 482 credit score 483 credit score 484 credit score 485 credit score 486 credit score 487 credit score 488 credit score 489 credit score 490 credit score 491 credit score 492 credit score 493 credit score 494 credit score 495 credit score 496 credit score 497 credit score 498 credit score 499 credit score 500 credit score 501 credit score 502 credit score 503 credit score 504 credit score 505 credit score 506 credit score 507 credit score 508 credit score 509 credit score 510 credit score 511 credit score 512 credit score 513 credit score 514 credit score 515 credit score 516 credit score 517 credit score 518 credit score 519 credit score 520 credit score 521 credit score 522 credit score 523 credit score 524 credit score 525 credit score 526 credit score 527 credit score 528 credit score 529 credit score 530 credit score 531 credit score 532 credit score 533 credit score 534 credit score 535 credit score 536 credit score 537 credit score 538 credit score 539 credit score 540 credit score 541 credit score 542 credit score 543 credit score 544 credit score 545 credit score 546 credit score 547 credit score 548 credit score 549 credit score 550 credit score 551 credit score 552 credit score 553 credit score 554 credit score 555 credit score 556 credit score 557 credit score 558 credit score 559 credit score 560 credit score 561 credit score 562 credit score 563 credit score 564 credit score 565 credit score 566 credit score 567 credit score 568 credit score 569 credit score 570 credit score 571 credit score 572 credit score 573 credit score 574 credit score 575 credit score 576 credit score 577 credit score 578 credit score 579 credit score

580 credit score 581 credit score 582 credit score 583 credit score 584 credit score 585 credit score 586 credit score 587 credit score 588 credit score 589 credit score 590 credit score 591 credit score 592 credit score 593 credit score 594 credit score 595 credit score 596 credit score 597 credit score 598 credit score 599 credit score 600 credit score 601 credit score 602 credit score 603 credit score 604 credit score 605 credit score 606 credit score 607 credit score 608 credit score 609 credit score 610 credit score 611 credit score 612 credit score 613 credit score 614 credit score 615 credit score 616 credit score 617 credit score 618 credit score 619 credit score 620 credit score 621 credit score 622 credit score 623 credit score 624 credit score 625 credit score 626 credit score 627 credit score 628 credit score 629 credit score 630 credit score 631 credit score 632 credit score 633 credit score 634 credit score 635 credit score 636 credit score 637 credit score 638 credit score 639 credit score 640 credit score 641 credit score 642 credit score 643 credit score 644 credit score 645 credit score 646 credit score 647 credit score 648 credit score 649 credit score 650 credit score 651 credit score 652 credit score 653 credit score 654 credit score 655 credit score 656 credit score 657 credit score 658 credit score 659 credit score 660 credit score 661 credit score 662 credit score 663 credit score 664 credit score 665 credit score 666 credit score 667 credit score 668 credit score 669 credit score

670 credit score 671 credit score 672 credit score 673 credit score 674 credit score 675 credit score 676 credit score 677 credit score 678 credit score 679 credit score 680 credit score 681 credit score 682 credit score 683 credit score 684 credit score 685 credit score 686 credit score 687 credit score 688 credit score 689 credit score 690 credit score 691 credit score 692 credit score 693 credit score 694 credit score 695 credit score 696 credit score 697 credit score 698 credit score 699 credit score 700 credit score 701 credit score 702 credit score 703 credit score 704 credit score 705 credit score 706 credit score 707 credit score 708 credit score 709 credit score 710 credit score 711 credit score 712 credit score 713 credit score 714 credit score 715 credit score 716 credit score 717 credit score 718 credit score 719 credit score 720 credit score 721 credit score 722 credit score 723 credit score 724 credit score 725 credit score 726 credit score 727 credit score 728 credit score 729 credit score 730 credit score 731 credit score 732 credit score 733 credit score 734 credit score 735 credit score 736 credit score 737 credit score 738 credit score 739 credit score

740 credit score 741 credit score 742 credit score 743 credit score 744 credit score 745 credit score 746 credit score 747 credit score 748 credit score 749 credit score 750 credit score 751 credit score 752 credit score 753 credit score 754 credit score 755 credit score 756 credit score 757 credit score 758 credit score 759 credit score 760 credit score 761 credit score 762 credit score 763 credit score 764 credit score 765 credit score 766 credit score 767 credit score 768 credit score 769 credit score 770 credit score 771 credit score 772 credit score 773 credit score 774 credit score 775 credit score 776 credit score 777 credit score 778 credit score 779 credit score 780 credit score 781 credit score 782 credit score 783 credit score 784 credit score 785 credit score 786 credit score 787 credit score 788 credit score 789 credit score 790 credit score 791 credit score 792 credit score 793 credit score 794 credit score 795 credit score 796 credit score 797 credit score 798 credit score 799 credit score

Resources

Credit Score

Credit Report

Fraud & Identity Theft

Improve Credit

Personal Finance

Calculators

What Is a Credit Utilization Rate?

Revolving Credit

Per-card vs. Total Utilization

What is a Good Credit Utilization Rate?

Balance Reporting and Credit Utilization

Should You Open Credit Cards to Improve Your Credit Utilization Rate?

How Closing a Credit Card Can Affect Your Credit Utilization Rate

Learn More About Credit Utilization

Instantly raise your FICO^® Score for free

How Good Is Your Credit Score?

Resources

Latest Research

Latest Reviews

Instantly raise your FICO^® Score^☉ for free^ø

Credit support

Credit advice

Most popular

Credit reports

Credit scores

Improving credit

Establishing credit

Identity Theft support

Identity Theft Advice

Most popular

Identity theft and fraud

Cybersecurity

Privacy

Money advice

Digital checking account

Save money on bills

Credit Card advice

Most popular

Balance transfer

Cash back

For bad credit

For fair credit

For students

APR

Rewards

New to credit

Loan advice

Most popular

Debt consolidation

Personal

Student

Auto advice

Most popular

Revolving Credit

Per-card vs. Total Utilization

What is a Good Credit Utilization Rate?

Balance Reporting and Credit Utilization

Should You Open Credit Cards to Improve Your Credit Utilization Rate?

How Closing a Credit Card Can Affect Your Credit Utilization Rate

Learn More About Credit Utilization

Instantly raise your FICO® Score for free

How Good Is Your Credit Score?

Resources

Latest Research

Latest Reviews

Instantly raise your FICO^® Score for free