Credit Utilization Ratio: What It Is, Why It’s Important, and How to Master It

If you have credit cards, make sure you’re not putting too much money on them at any one time. Utilizing too much of your total credit limit can hurt your credit score.

Your credit score is very important. We’ve mentioned that before, but we’re going to mention it again. And then again after that. And then at least three more times.

And why do we keep saying it? Because it’s true! Your credit score is very important. It can determine whether you’re able to get a loan and at what rate. Given the importance of borrowing money in modern day life, this will affect whether you’re able to get a mortgage or credit card or car or apartment or sometimes even a job. Without a good score, the only loans you’ll be able to qualify for are bad credit loans—and the wrong bad credit loan could set you back big time.

Unfortunately, understanding your credit score isn’t always as easy as it should be. For example, how much money you currently owe makes up almost one-third of your total score. But the credit-scoring formula doesn’t just take into account how much you owe, it also accounts for what’s called your “credit utilization ratio.”

But what is your credit utilization ratio, and how do you keep it healthy? You probably aren’t sure, or else you wouldn’t be reading this article. Or maybe you have a pretty good sense of it but you were looking for some additional tips. Either way, read on!

So what is this “credit utilization ratio” anyway?

We spoke to the experts to find out how they would describe credit utilization ratios. Now we’re bringing those explanations to you, curious readers!

“Your credit utilization ratio is the relationship between your credit card limits and your account balances (as they appear on your credit reports),” explained Michelle Black (@MichelleLBlack), credit expert and founder of

“It describes the percentage of your available credit which you are actually using. Revolving utilization is hugely influential over your credit scores. It’s nearly as important as your payment history. In fact, an impressive 30% of your FICO credit scores are largely based upon your revolving utilization ratios.”

Here’s an illustrative example from Leslie H. Tayne Esq. (@LeslieHTayneEsq), Founder and Head Attorney at Tayne Law Group (@taynelawgroup):

“Your credit utilization ratio is the percentage of your allotted credit that you owe. “It includes all of your lines of credit and all of your balances. For example, if you have two credit cards each with $6,000 lines of credit for a total of $12,000, and you are carrying a balance of $1,000 on one and $2,000 on the other, your credit utilization ratio is 25 percent.”

What kind of number should you aim for?

Now that you know what your credit utilization ratio is, what does a good credit utilization ratio look like?

“I suggest to my clients that they try to use only 30 percent of the available credit, and never max out a card, meaning do not use every dollar of the utilization,” Tayne told us. “I recommend keeping your credit utilization ratio under 30 percent to prevent it from negatively impacting your credit score.

“This should apply to both your individual cards and your cumulative total. Having a high credit utilization ratio tells creditors that you’re most likely spending a lot of your income on debt payments, meaning you may be a higher default risk. Having a high utilization rate can affect whether you qualify for loans or what your interest rate will be if you are approved. The best credit utilization ratio, of course, is zero or under 10 percent.”

Black echoed this sentiment:

“Ideally, you should aim to keep the revolving utilization ratios on your credit reports as low as possible. Best practices include paying off your credit card balances in full each month. Additionally, it is a good idea to pay off your full balance a few days before the statement closing date on your account. Doing so will ensure that your statement will show a $0 balance and that a $0 balance will be reported to the three credit bureaus for the upcoming month.”

Keeping it 30 (or lower).

So what steps can you take to improve your credit utilization? Well, one of the best ways is by paying off your balances in full and early, as Black mentioned.

Kelan Kline of The Savvy Couple (@TheSavvyCouple) offered a couple additional methods for keeping a healthy credit ratio:

Ask for a credit line increase. We do this every 6-12 months and it works out very well. This will allow you to spend more money on a certain credit card without having to worry about using too much of your credit limit.

Get another card. You can always have more than one card open which can help spread out spending during higher spending months like the holidays. It’s always important to remember that credit cards are NOT meant to hold a balance from month to month. Being responsible is even more important when you have more than one card.”

By keeping your credit utilization ratio low, you’ll be keeping your credit score in a better place. Follow all this advice, especially the parts about paying all of your bills off in full and on time, and a better credit future will be in your grasp.

When you’ve got a lousy credit score, an emergency expense might leave you stuck with predatory no credit check loans like payday loans and cash advances. This is one of the many reasons why maintaining your score is important! To learn more about how credit scores work—and how you can improve yours—check out these related posts and articles from OppLoans:

What else do you want to know about credit scores? Let us know! You can find us on Facebook and Twitter.

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Michelle Black is a credit expert, freelance writer, and founder of You can find her on Twitter @MichelleLBlack.
Kelan and Brittany Kline aka The Savvy Couple are two thriving millennials that are daring to live differently. They started their personal finance blog in September 2016 to help others get money $avvy so they can live a frugal and free lifestyle. Brittany is a full-time 4th-grade teacher and Kelan runs The Savvy Couple full-time and works as a digital marketer. You can follow them here: FacebookTwitterPinterest, and Instagram.
Leslie H. Tayne, Esq. (@LeslieHTayneEsq) has nearly 20 years’ experience in the practice area of consumer and business financial debt-related services. Leslie is the founder and head attorney at Tayne Law Group (@taynelawgroup), which specializes in debt relief.

The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.