Blog » Community » How important is credit card utilization?

How important is credit card utilization?

Credit card utilization is the second most important factor in credit scores. Your utilization rate, or balance-to-limit ratio, is simply the total of your credit card balances divided by the total of your credit card limits, generally expressed as a percentage.

High balances are a sign that you may be overextending your credit card use, which could result in an inability to repay the debt if you had a financial setback.

As a rule, you never want the total of your balances to be more than 30 percent of the total of your credit limits. For example, if your total credit limit is $10,000, your total revolving balance shouldn’t exceed $3,000. The same applies to the individual balance on each card, which shouldn’t be higher than 30 percent of that card’s credit limit.

Ideally, it is best to pay your balance in full each month and not carry a balance at all. In fact, people with the best credit scores have utilization rates of less than 10 percent.

Generally, a low credit utilization rate is considered an indicator that you’re doing a good job of managing your credit responsibly because you’re far from overspending. A higher utilization rate, however, could concern potential lenders or creditors that you are at risk of having trouble managing your finances.

More information on utilization rates can be found on the Ask Experian blog.

Check out the scope to hear answers to all the questions asked:

View scope.

Do you have questions about credit?

Join our live video chat every Tuesday and Thursday at 3:00 p.m. ET on Periscope. Rod Griffin, Director of Public Education at Experian, is available to answer your questions live.
Scoped on: 6/6/2017

Review Your Free Experian Credit Report Today

Good credit begins with knowing where your credit is today. Get started with your free Experian Credit Report, updated every 30 days on sign in. No credit card required.

Get Started for Free

Credit Education

Credit Cards & Loans

Get credit cards and loans from our trusted network of partners. See credit offers based on your credit when you sign up for free.

Browse Credit Cards & Loans

Here’s How Much Your Personal Information Is Selling for on the Dark Web

The dark web is a huge marketplace for stolen data and personal information. Find out how much your information is selling for on the dark web.