Credit utilization is the percentage of your available credit that you're currently using. It’s a key factor in your credit score, and one of the easiest things you can improve quickly in order to increase your credit score.
People don’t always consider credit utilization in their everyday spending, but it’s not too difficult to wrap your head around and keep track of.
If you have a credit limit of $10,000 and you’re using $3,000, your credit utilization rate is 30%.
Banks and credit bureaus use utilization as a measure of how responsibly you manage your available credit. A high utilization rate suggests you may be overextended, while a low rate signals healthy borrowing habits.
Basically if your credit cards are maxed out, it’s a red flag to banks that you’re not using credit cards properly.
It impacts your credit score because lenders want to see that you're not relying too heavily on credit to cover your expenses.
Most experts recommend keeping your credit utilization below 30%, but lower is better.
0–9% - Excellent
10–29% - Good
30–49% - Fair
50%+ - Poor / High Risk
This applies per card and across all your cards combined.
Q: Does using more than 30% hurt my score?
A: Not instantly, but consistently going over 30% can gradually lower your score.
Q: If I pay my card in full every month, does utilization still matter?
A: Yes. Credit bureaus look at your balance when the statement closes — not just when you pay it off.
Q: Should I close old cards to reduce available credit?
A: No — that can raise your utilization ratio and lower your score. It's usually better to keep them open.
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