Just a few points on your credit score can make the difference in being approved or denied credit. But multiple factors go into credit scoring, including your payment history, amounts owed, and credit mix.
Approximately 30% of your FICO credit score is based on the amount of debt you owe. Only payment history ranks higher, at 35%. Your overall amount of debt plays an important role in scoring, but FICO also takes a look at your revolving accounts to determine just how much of your allotted credit you’re using. The lower that ratio, the better. That’s what FICO calls your revolving utilization rate.
Key Takeaways
- Revolving utilization shows how much of your available credit you’re using. It’s a major factor in your credit score and is best kept under 30 percent.
- To calculate it, divide your credit card balance by your credit limit and multiply by 100. Lowering this percentage can help raise your score.
- You can improve your utilization by paying down debt, requesting higher credit limits carefully, setting balance alerts, or consolidating with a personal loan.
What is revolving utilization and how does it affect your credit?
Revolving utilization—also called credit utilization—is the percentage of your available credit that you’re currently using. It’s calculated by dividing your credit card balance by your credit limit. The lower the percentage, the better it looks to lenders.
High utilization can signal financial stress, while low utilization shows you’re managing credit responsibly. That makes you more likely to qualify for better interest rates and loan terms.
Lenders look at both individual cards and your total usage across all revolving accounts. Keeping tabs on these balances can help you protect and improve your credit score over time.
How to Calculate Your Revolving Utilization
To find your revolving utilization rate, divide your credit card balance by your credit limit, then multiply by 100 to get a percentage:
Balance ÷ Credit Limit × 100 = Utilization Rate
For example, if your balance is $2,000 and your credit limit is $10,000, your utilization is 20%:
$2,000 ÷ $10,000 × 100 = 20%
You can calculate this for each card or across all revolving accounts. Online calculators can help you track both individual and total utilization, making it easier to spot areas for improvement.
What’s considered a good revolving utilization rate?
In general, the lower your credit utilization rate, the better. It shows you’re managing credit well and not relying too heavily on borrowed money. Most scoring models consider anything under 30 percent to be good—but lower is always better if you’re aiming to boost your credit score.
If you’re preparing to apply for a mortgage, auto loan, or other installment loans, keeping your utilization low can improve your chances of approval and help secure better terms.
How Per-Card and Total Utilization Are Calculated
Credit scoring models may look at your utilization in two ways—per card and overall. Some models weigh each credit card separately, while others look at your total balance across all cards compared to your total credit limit.
That means even if one card has a high balance, a low overall utilization could still work in your favor. Ideally, aim to keep both individual and total utilization below 30 percent.
When Credit Card Activity Appears on Your Credit Report
If you’re focused on cleaning up your credit report ahead of a big purchase, timing matters. Paying down a balance today won’t show up on your credit report right away.
Most credit card issuers report to the credit bureaus once per billing cycle—usually right after the statement closes. It may take a few weeks for updates to appear, so plan ahead if you’re trying to improve your score quickly.
Is 0% credit utilization always a good thing?
Keeping your utilization at 0% isn’t a problem, but scoring models tend to reward small, regular usage that’s paid off in full. Using your card and paying the balance before the due date shows you’re actively managing credit—not just avoiding it. That activity can help boost your credit profile over time.
5 Ways to Improve Your Credit Utilization Ratio
Your credit profile builds over time, but if you’re working to improve your credit score, lowering your utilization ratio is one of the quickest ways to make progress. Here are five strategies that can help:
1. Reduce your credit card debt
Even small payments can move the needle. Start by calculating how much you need to pay down to bring your utilization under 30%. Then make a plan to chip away at your balances consistently—ideally, by paying more than the minimum each month.
2. Request higher credit limits
A higher credit limit lowers your utilization without requiring you to pay off more debt. Contact your credit card company and ask for an increase—just be aware it could trigger a hard inquiry, which might cause a short-term dip in your credit score.
3. Set up balance alerts
Most credit cards let you set alerts when your balance hits a certain amount. These reminders can help you keep spending in check and avoid creeping over that 30 percent threshold.
4. Make payments twice a month
Don’t wait for your statement to close—make an extra payment mid-cycle. This keeps your balance lower when issuers report to the credit bureaus, which can lead to a lower utilization rate on your credit report.
5. Consolidate with a personal loan
Transferring credit card balances to a personal loan turns revolving debt into installment debt. This can lower your utilization ratio and, if paid on time, help improve your overall credit profile.
Frequently Asked Questions
If I pay off my entire credit card balance before the due date, will my revolving utilization be 0%?
Yes, if you pay off your entire balance before it’s reported to the credit bureaus, your utilization for that particular card will show as 0%. However, remember that the timing depends on when your credit card issuer reports to the bureaus.
What happens if my credit utilization spikes for one month?
A single month of high credit utilization might negatively impact your credit score temporarily. However, if you bring that utilization down the following month, your score can recover.
Does closing a credit card raise my utilization rate?
Yes. Closing a card lowers your total available credit, which can drive up your utilization—even if your spending stays the same. If you’re trying to improve your score, think twice before closing old accounts.
Can one high-balance card hurt my score even if my total utilization is low?
It can. Some credit scoring models look at each card individually. A single card with a high balance—even if others are low—might still ding your score.
Does a balance transfer affect my utilization?
It can help if you move your balance to a card with a higher limit or lower rate. But don’t run up the old card again—that would just raise your utilization across the board.
