Credit Utilization Calculator

What is your credit utilization ratio?

Your credit utilization ratio is a percentage that shows how much of your available credit you’re currently using. When you apply for a credit card, you’re asking an issuer to provide you with a limited amount of money you can borrow and use to cover purchases, cash advances and, in some cases, balance transfers. This amount, known as a credit limit, can be as little as $50 or over $10,000 depending on your card type, issuer, credit score and other factors. When you use up some of your credit limit – such as by making purchases – the amount of money you’ve borrowed relative to the total amount available to you is expressed as a percentage and is known as your credit utilization ratio.

For example, if you spend $100 on purchases and you have a $1,000 in total available credit across all your credit cards, then your credit utilization is 10%.

What is a good credit utilization ratio?

Even if you have a high credit limit, you’ll want to avoid using all or even most of it. That’s because credit utilization makes up 30% of your FICO credit score, and having a high credit utilization ratio can have a negative impact on your score. Though credit score dings from high utilization are temporary, they can be frustrating, especially when you’ve worked hard to build your credit.

To avoid damaging your score, you’ll want to maintain a healthy credit utilization ratio. A common rule of thumb is to keep your credit utilization ratio below 30%, but the lower your utilization, the better. As such, cardholders who have higher credit limits, avoid overspending and pay off bills more frequently can have an easier time keeping their credit utilization in check.

The best thing you can do to maintain great credit utilization is borrow only the minimum amount you need from your available credit. Doing so shows lenders you’re a reliable borrower and don’t run up large expenses you might not be able to pay off in a timely manner.

To maintain good credit utilization, budget wisely and aim to only use your credit cards on regular purchases you can pay off each month. Try to stay below 30% utilization to start, but, if possible, an even lower credit utilization ratio would be better.

Benefits of knowing your credit utilization ratio

Being aware of your credit utilization ratio can not only help you stay on track as you work to build or maintain good credit, but it can also help you stick to a budget. For example, if you aim to use 20% of your available credit each month and you see that you’re at 25%, you can take this as a sign to reel in your spending. You can not only see that you’ve gone over budget, but also that you’re getting closer to the recommended maximum of 30% utilization and could harm your credit score.

If you plan to apply for a mortgage or take out a car loan, knowing where you stand with credit utilization can also be a huge advantage. That’s because credit utilization is one of the key metrics used by lenders to determine whether you’re a good candidate for loans. If you frequently max out cards or maintain consistently high utilization, lenders may review your credit report and history and see you as a risky applicant.

By being aware of your credit utilization and working to maintain low utilization, you can take an active role in showing lenders that you spend reasonably, pay off what you borrow reliably and are therefore more creditworthy.

Similarly, knowing your credit limit can help you be strategic with how you use your credit card each billing cycle. If you know your credit limit and pay off your balance in full each month, calculating your credit utilization is a simple matter of knowing how much you’ve spent during the billing cycle in question.

For instance, if you know you have a credit limit of $1,000 and are keen on maintaining a credit utilization of 30%, then you can be careful not to spend or owe more than $300 each billing cycle.

Can lowering your credit utilization raise your credit score?

The short answer is yes, lowering your utilization can boost your credit score. How much it helps, however, will depend on a few factors.

If you’re starting with high credit utilization and significantly lower your utilization, then your credit score could rise considerably. This would be a signal to the scoring model that you’re catching up with your debt and could help your score recover from the negative impact of high utilization.

If your utilization is already low, however, lowering it further may not have a huge impact on your credit score. In this case, your score likely isn’t being negatively impacted by your credit utilization and maintaining low credit utilization to prevent your score from dropping should be your goal.

Overall, curbing your credit usage or maintaining low utilization are great ways to build or maintain a good credit score. These practices will in turn help you qualify for lower interest rates on loans or other cards.

How to lower your credit utilization ratio

• Spend minimally with your credit cards each billing cycle.
• Request a credit line increase from your credit card issuer to give yourself more room to maintain low credit utilization.
• If you haven’t opened a new card account in a while, consider applying for a new card to raise your total available credit.
• If you have low limits on your cards, consider spreading your spending across multiple cards to keep your per-card credit utilization low.
• Monitor your utilization regularly to keep yourself from spending over your target threshold.
• Consider paying off your credit card balances as payments are posted instead of waiting until they are due.