Does Credit Utilization Matter if You Pay in Full?

Quick Answer

Your credit utilization ratio is important even if you pay your bills in full. You could have a high credit utilization if your card issuer has already reported your card’s balance to the credit bureaus prior to your payment.

A woman using her credit card in a small ceramics shop with the store clerk holding the point-of-sale card scanner.

You won't accrue interest on your purchases if you pay your credit card bill in full each month, and the on-time payments can help improve your credit score. However, paying in full doesn't guarantee you'll have a low credit utilization ratio, and a high utilization ratio could hurt your credit scores. If you want to be sure you'll have a low utilization ratio, you may need to pay down your balance before the end of each billing cycle—generally, about three weeks before the bill is due.

How Credit Utilization Impacts Credit

Your credit utilization is an important factor in your credit score, and a low utilization ratio is best for your scores.

  • FICO® Scores include credit utilization as part of the "amounts owed" category, which makes up approximately 30% of your FICO® Score. Other factors, such as how many accounts you have with balances, also impact that category.
  • VantageScore® includes credit utilization in a category that it calls "total credit usage, balance, and available credit," which is an extremely influential part of your VantageScore.

Credit scoring companies have found high utilization ratios correspond with a person missing bill payments, which is why high utilization hurts your scores. After all, someone who is using their credit cards a lot might be in a financial pinch and struggle with their bills.

But there are also people who use credit cards to earn rewards or for other protections and then pay their bill in full. Although they might not be struggling financially, their high utilization ratio could still negatively impact their credit score.

Is My Utilization Zero if I Pay Off My Credit Card Each Month?

Your credit utilization won't necessarily be zero, even if you pay your credit card bill in full every month. To understand why, consider how scoring models calculate utilization—which is essentially your account's balance divided by its credit limit and displayed as a percentage.

Although there can be minor calculation differences depending on the type of credit score, all credit scores:

Your current card balance and the balance on your credit report are usually different because credit card issuers tend to report your card's balance information to the credit bureaus monthly, at the end of each billing cycle. That's also when they send your statement and bill, which is due around 21 to 25 days later.

As a result, you can pay the bill in full to avoid interest, but the card issuer has already reported your card's balance and credit limit. And utilization depends on what's in your credit report—not your current account balances.

Additionally, even if you pay your bill in full, your current card balance won't be zero unless you haven't used the card since the end of your last billing cycle.

How to Lower Your Credit Utilization Ratio and Improve Credit

If you want to lower your credit utilization ratio to improve your credit score, but don't want to use your credit card less often, here are a few things you can do:

  • Pay down the balance early. Rather than waiting until your bill is due, you can pay down your balance before the end of each billing cycle. Or, you can make several payments throughout the month to bring down the balance that gets reported.
  • Ask for a credit limit increase. A higher credit limit can also lead to a lower utilization if you maintain the same spending habits. You may be able to call your card issuer or ask for a credit limit increase through your online account.
  • Don't close old credit cards. Every credit card contributes to your total available credit, which is one reason keeping credit cards open can be helpful. However, it might not be worth paying an annual fee for a card you don't use.
  • Open a new credit card. Generally, applying for credit solely to improve your credit score isn't a good idea. However, if you see a card that has a good intro bonus or enticing benefits, you could get a new credit card and also benefit from the increased available credit.

A general rule of thumb is to keep utilization under 30%, but lower is even better. If you're paying off your credit card in full each month anyway, try to keep your overall utilization under 10% instead.

Additionally, some utilization is actually better than 0% utilization. Instead of paying off your entire balance early, you may want to pay down your balance until you're using only a couple of percentage points of your card's credit limit. Then, pay off the remaining balance before your bill's due date to avoid interest charges.

Other Ways to Improve Your Credit Score

Credit utilization can be an important scoring factor, and it's one of the few scoring factors that you may be able to quickly change to improve your credit score. But there are lots of other things you can do to build and maintain a good credit score.

  • Pay your bills on time. Your payment history is even more important than your credit usage, and having a history of on-time payments is important for improving your credit.
  • Use Experian Boost®ø. Experian Boost is a free feature you can use to add on-time payments for several types of accounts to your Experian credit report, including eligible rent, utility and streaming service bills. These usually aren't part of your credit report, so the new accounts might instantly boost your credit score.
  • Use different types of credit accounts. Your credit utilization ratio only considers revolving credit accounts. But having open installment loans, such as an auto, student, home or personal loan, can add to your credit mix and help your scores.
  • Pay off collection accounts. If you've had accounts sent to collections, try to pay them off. Newer scoring models may ignore paid-off collections, which could increase your scores.
  • Review your credit reports for errors. Although it's not common, credit reports sometimes have errors that could be hurting your credit score. Closely review your credit report; you have the right to dispute erroneous information if you find any.

Check Your Utilization Ratio and Credit Score

Create and log in to your free Experian account to get a free copy of your credit report and your FICO® Score. Experian automatically calculates your overall credit utilization ratio, and you can click on each of your credit accounts to see the account's individual utilization ratio. You can also review the key factors affecting your credit score to see if your utilization is helping or hurting your credit score.