Key takeaways
Your credit utilization ratio shows how much of your available credit you use, and it can affect your credit score.
Keep your overall credit utilization below 30%, and lower utilization generally helps.
You can calculate your ratio by dividing your total credit card balances by your total credit limits.
Lowering your balances or increasing your credit limits are two ways that may affect your utilization ratio.
Paying bills on time can help your credit score. But fewer people know how much their credit utilization ratio can matter too. If you haven't heard the term before, we're here to break down what you need to know and how utilization can affect your score.
What is a credit utilization ratio?
If you've ever wondered how lenders decide if you're a "creditworthy" borrower, your credit utilization is a big piece of that puzzle. Your credit utilization ratio measures the amount of revolving credit you use compared to the total credit available to you. Think of it as a percentage that shows how much of your available credit you're leaning on.
Revolving credit means a credit line you can borrow from, repay and use again, like a credit card. To find your credit utilization ratio, divide your total reported revolving balances by your total credit limits, then multiply by 100. A $300 balance on a $1,000 limit gives you a 30% ratio.
A lower ratio may help your credit score, while a high ratio can pull it down. That makes utilization one of the first things to check if you're working to improve your credit score. In this guide, we'll cover why this ratio matters, how to calculate it, and simple ways you can improve it.
A cookie jar analogy
Let's say you have a jar with 10 cookies, and you eat 3 of them. That means you ate 30% of the cookies available to you. The credit you're using would be the 3 cookies you ate, and your total credit limit would be the jar with all 10 cookies.
So, your credit utilization would be 30%. Lenders typically want to see that you won't eat the whole jar of cookies in one sitting!
Which accounts count toward credit utilization?
Not every account you owe money on counts toward your ratio. Equifax®, one of the three major credit bureaus, defines utilization as the revolving credit you're using divided by your total available revolving credit. Credit bureaus are companies that collect your credit history and share it with lenders.
Account type | Counts toward utilization? |
|---|---|
Credit cards | Yes |
Personal lines of credit | Yes |
Mortgages | No |
Auto loans | No |
Student loans | No |
Personal loans | No |
Installment loans give you a set amount that you repay on a fixed schedule. These loans don't count toward your credit utilization ratio. They still shape other parts of your credit, like your payment history and credit mix.
Why is credit utilization important for your credit score?
So, why should you care about this percentage? Because it can make a big difference in your credit score! Under the most common scoring models like FICO®, utilization falls into the "amounts owed" category, which makes up 30% of a FICO Score.
Payment history ranks as the largest factor at 35%. A high utilization ratio can signal to lenders that you might rely heavily on credit, making you seem like a riskier borrower.
On the flip side, a low ratio tells lenders you're managing your credit responsibly and don't need to lean on it to get by. That may help your score.
How to calculate your credit utilization ratio
Okay, let's get down to the numbers. Calculating your ratio is actually pretty simple.
You can do it for each card on its own and for all your cards combined. Both numbers can matter, so it helps to check each one. Here's how:
Add up the current balances on all your revolving credit accounts, like credit cards.
Add up the total credit limits for all those accounts.
Divide your total balance by your total credit limit.
Multiply that number by 100 to get your percentage.
For example, let's say you have these cards:
Credit card | Credit card balance | Credit card limit |
|---|---|---|
1 | $1,350 | $3,000 |
2 | $489 | $2,000 |
3 | $911 | $1,000 |
TOTAL | $2,750 | $6,000 |
You would divide your total balance of $2,750 by your total limit of $6,000 to get 0.458. Multiply by 100, and your overall credit utilization ratio comes to about 46%.
Overall vs. per-card utilization
Your overall ratio tells only part of the story. Experian® says both your overall ratio and the ratio on individual accounts can affect your credit scores. That means maxing out one card can hurt your score, even if your overall ratio looks low.
Look at card 3 in the table above. Its $911 balance on a $1,000 limit puts that card at about 91%. Paying down card 3 first could make a real difference.
What is a good credit utilization ratio?
When it comes to credit utilization, lower is generally better. A great rule of thumb is to keep your ratio below 30%. So, if you have a $1,000 credit limit, you'd want to keep your balance under $300.
Keeping utilization below 30% is a common guideline, but there is no universal cutoff. Here's a quick look at common ranges:
Credit utilization ratio | What it may mean |
|---|---|
Common among top scorers and may be even better for your scores | |
10%–29% | Within the common rule of thumb |
May have a more pronounced effect on your scores |
Want to work toward a perfect or near-perfect credit score? Aim for even lower. Experian data from June 2026 shows consumers with an 850 FICO Score averaged about 4% utilization, against a 29% national average.
Remember, even if you pay your balance in full each month, the balance your card issuer reports might come from before your payment. myFICO says your reported balance typically matches your latest monthly statement. So, try to keep your balance low throughout the month.
How can you improve your credit utilization ratio?
If your utilization is a bit higher than you'd like, don't worry – you have a few ways to lower it. The two main strategies target your balance and your limit, and a few simple habits can help too.
Lower your balance
This is the most direct approach. Focus on paying down your credit card debt. Even one extra payment can help shrink the balance your card issuer reports.
Increase your credit limit
If you have a good payment history, you can ask your current card issuer for a credit limit increase. A higher limit with the same balance lowers your ratio. Just be careful not to see it as an opportunity to spend more.
Some card issuers may run a hard inquiry when you ask for a higher limit. A hard inquiry means a full credit check, and it may temporarily lower your score.
Pay before your statement closes
Your reported balance often matches your latest statement balance, as the section above explains. A payment a few days before your statement closes may lower the balance that shows up on your credit report. Reporting dates vary by issuer, so check your card's statement closing date.
Spread balances across cards
Try to keep any single card from running high. Per-card utilization can matter too, so shifting some spending to a card with more room may help.
Keep old cards open
Older cards add to your total available credit. Keeping them open can help hold your overall ratio down, as the next section shows.
Does closing a credit card affect credit utilization?
You might think closing an old credit card is good housekeeping, but it can hurt your utilization ratio. The Consumer Financial Protection Bureau says closing an existing card can raise your credit utilization ratio and lower your score.
When you close a card, you lose its credit limit from your total available credit. If you carry balances on other cards, your overall utilization can go up.
For example, say you have a $4,000 total balance and $12,000 in total limits, so your utilization sits at 33%. If you close a card with a $3,000 limit, your new total limit drops to $9,000. That can raise your utilization to 44% without you spending a dime!
That 44% comes from dividing $4,000 by $9,000. Carefully run the numbers before closing a credit card account, especially if it's one of your older ones.
Utilize credit wisely for your financial progress
Building credit can feel like a bit of trial and error, but understanding your credit utilization ratio is a huge step in the right direction. Paying your bills on time matters, and so does showing you can manage credit responsibly.
For more tips on managing all the factors that influence your credit, see our guide on how to build your credit score. It walks through 10 steps you can start on today.