Credit glossary
Credit utilization
The share of your credit card limits that your reported balances use, measured on each card and across all cards together.
Divide a card's reported balance by its limit to get its ratio, and total balances by total limits for the overall figure. It's the best-known piece of the amounts owed category, which FICO puts at about 30% of a score for the general population. Lower generally scores better. FICO has said its data shows no cliff at 30%, that staying under 10% tends to help, and that 0% can keep a file from the maximum.
Most score versions read only the latest reported balances, so high utilization stops counting once a lower balance reports. Trended models are the exception: FICO 10T and VantageScore 4.0 look at balance history over time. Because issuers usually report around the statement closing date, paying before that date is how you lower the number the bureaus see.
Example
Say you carry $900 on a card with a $1,000 limit and $0 on two cards with $4,500 limits each. Overall utilization is $900 รท $10,000 = 9%, but the first card sits at 90%, and scores look at both.
Guides that go deeper
- Credit utilization, explained with the actual mathCredit utilization is card balances divided by card limits. See the math per card and overall, what counts, and why last month's ratio stops mattering.
- Per-card vs. overall utilization: why one maxed card still hurtsScores look at each card's balance-to-limit ratio and at all cards combined. See how one maxed-out card can drag down a healthy overall ratio, with math.
- Is there a best credit utilization percentage?Everyone quotes a different utilization target: 30%, 10%, 1%. What FICO and VantageScore actually say, and how to pick a target for your situation.
Sources
- What is Amounts Owed?, myFICO
- What Should My Credit Utilization Ratio Be? (myFICO release), myFICO via Business Wire
- Did you know? All about the impact of percent of credit limit used, VantageScore
- What You Need to Know About the New FICO 10 Scores, Experian
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.