Credit Card Utilization and Your Credit Score

Money Girl's tips to raise your credit score when you have multiple credit accounts.

Laura Adams, MBA
2-minute read

Credit Card Utilization and Your Credit ScoreQ. "I know keeping my credit utilization at 30% or less is best for raising my credit score. If I have 3 credit cards, does that ratio apply to each card, or is it calculated as an average of all 3?"

A. Credit utilization is how much of your available credit you use, and is a critical factor in how your credit scores are calculated.  

Credit utilization applies to revolving accounts, which don’t have a fixed term, such as credit cards and lines of credit. It doesn’t apply to fixed loans—like the kind you get for a car or home—that have an ending date.

The definition of credit utilization is your total account balances divided by your total credit limits. For example, if you have a credit card with a balance of $1,000 and a credit limit of $2,000, your credit utilization is 50% ($1,000 / $2,000 = 0.50).

By paying down your balance on the card to $500, you could lower your utilization to 25% ($500 / $2,000 = 0.25) and boost your credit score.

If you have more than one credit card or line of credit, keep your utilization below 30% on each account and collectively on all your accounts. It’s better to spread out your balances on multiple credit cards with low utilization than to have one account with high credit utilization.

Although high utilization hurts your score, keeping utilization at 0% isn’t recommended either. Creditors like consumers who use credit, but manage it responsibly.

You never have to carry a credit card balance from month to month to show credit utilization. Even if you pay off your balance in full every month, simply using your card is enough to show activity and build great credit.

Other Links You Might Like:

5 Ways to Get a Loan with Bad Credit

How to Get a Credit Card with Bad Credit

25+ Best Tools for Money Management and Productivity

Credit Score Survival Kit – a free multimedia video tutorial with 3 strategies to raise your credit scores!

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Holding Credit Card image from Shutterstock

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.