What Is a Good Credit Utilization Ratio?

Credit utilization is one of the most important factors in your credit score calculation, accounting for approximately 30% of your FICO score. Understanding what makes a “good” credit utilization ratio can help you maintain or improve your credit score.

The Quick Answer

A good credit utilization ratio is generally considered to be below 30% of your available credit. However, for the best possible impact on your credit score, aim to keep your utilization below 10%.

What Exactly Is Credit Utilization?

Credit utilization represents the percentage of your available credit that you’re currently using. It’s calculated by dividing your total credit card balances by your total credit limits.

For example: If you have two credit cards with limits of $5,000 each (total $10,000) and carry balances of $1,000 and $2,000 (total $3,000), your overall utilization ratio is 30% ($3,000 ÷ $10,000).

The Truth About the “30% Rule”

While many financial experts recommend keeping your credit utilization below 30%, this is somewhat misleading. Here’s what you should know:

• There is no cliff-edge at 30% where your score suddenly drops
• Utilization affects your score on a sliding scale—the lower, the better
• Those with the highest credit scores typically maintain utilization below 10%
• Even 1% utilization is better than 0% (showing some activity)

How Different Utilization Levels Affect Your Score

Here’s how different utilization ranges typically impact your credit score:

• 1-9%: Optimal impact—provides maximum points for the utilization factor
• 10-19%: Very positive impact—minimal point reduction
• 20-29%: Positive impact—small point reduction
• 30-49%: Moderate negative impact—noticeable point reduction
• 50-69%: Significant negative impact—substantial point reduction
• 70%+: Severe negative impact—major point reduction

Individual Card vs. Overall Utilization

FICO considers both your overall utilization across all cards and the utilization on each individual card. This means:

• Having one maxed-out card can hurt your score even if your overall utilization is low
• Spreading balances evenly across multiple cards is generally better than concentrating them on one card

How to Improve Your Credit Utilization

If your credit utilization is currently higher than ideal, here are effective strategies to improve it:

1. Pay down existing balances before statement closing dates (not just due dates)
2. Request credit limit increases on existing accounts
3. Apply for a new credit card to increase your total available credit
4. Make multiple payments throughout the month to keep balances low
5. Keep old accounts open even if you rarely use them
6. Set up balance alerts to notify you when you approach 10% and 30% thresholds

Final Thoughts

While 30% is generally considered an acceptable threshold for credit utilization, aiming for 10% or lower will yield the best results for your credit score. Remember that utilization has no memory in credit scoring—once you lower your utilization, your score can improve quickly without any lasting impact from previous high utilization.