Responding to credit score factor that says proportion of balances to limits is to high


Dear Experian,

Recently, I was told that my proportion of balances to credit limits is high. If I keep making payments to my credit card and keep my statement balance below 20% of my credit limit, will that help?



Dear ATD,

The statement “proportion of balances to credit limits is too high” refers to your overall utilization rate and means that that the balances on your credit cards are too high.

Scoring models compare the balance to the limit for each card and also the total of all of your balances compared to your total limits. Utilization rate can be the second most important factor in credit scoring only behind late payments.

Reducing your balances, especially on any account where the balance is close to the credit limit, should help improve your credit scores. Normally, the balance reported will be the amount due as reflected on your statement. However, keep in mind that your creditors can report your balance at any time during the month, so the balance reflected on your credit report may not be your statement ending balance. The only way to have a zero balance is to pay the statement in full and not make any charges during the next billing cycle.

Paying your balances in full every month should be your goal so that you avoid paying high interest rates. However, when low balances really become important is when you are ready to apply for a rate sensitive loan such as for a mortgage or auto. Then you want to really focus on getting your balances low even if you are paying them in full.

There is no magic percentage. The lower your utilization rate, the better, and most importantly, that you aren’t using your credit cards to spend more than you can afford.

Thanks for asking.

The “Ask Experian” team

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