The Difference Between Individual Card Utilization and Total Utilization

Knowledge is power – especially when it comes to handling your finances. And while many personal finance topics are pretty straightforward, there are a few things that aren’t always as intuitive as they could be. Such is the case with the credit utilization rate, sometimes called the credit utilization ratio.  

Credit Utilization Explained

The good news here is that credit utilization sounds more complicated than it really is. If you can do simple math or use a calculator, you can figure it out.

• It’s the percentage of the credit you have used compared to the total credit available to you.
• In other words, it shows how much of your credit limit you have spent.

Example. For simplicity, let’s say you have one credit card with a total credit limit of $10,000 and you’ve used $3,000 of it. That means your credit utilization would be 30%. 

Why Utilization Matters so Much

One of the biggest factors that goes into determining your credit score is how much available credit you have at any given time.

Utilization Percentage by Scoring Model

Here’s the breakdown of how much credit utilization impacts your total credit score:

• 30% of your FICO score is credit utilization, and
• 23% of your VantageScore

If you happen to spend too much, which is any more than 30% of your total available credit, your score is likely to dip – even if you make on-time payments every single month of the year. 

Millions Using Multiple Credit Cards

According to Federal Reserve data, more than 80% of U.S. adults have at least one credit card. That adds up to at least 216 million Americans using credit cards. On average, a typical adult has seven credit cards in their wallet and actively uses at least three of them. And it’s when you have more than one open credit card – or more than one line of revolving credit – that total credit utilization really comes into play.  

Your Total Utilization Rate

That’s one of the big reasons it’s important to have a firm understanding of how each card utilization rate relates to your total utilization rate for all of your credit cards. Beverly Harzog, credit card expert and author of “The Debt Escape Plan,” has been helping people build their credit scores and lower their debt (and utilization) for decades. She explains the following:

• Credit scoring companies don’t just look at individual card utilization.
• You also want to pay attention to the total utilization for all of your cards.

“A lot of times people will just look at the individual card and say this one is lower, and it won’t matter if I get a little higher on the next card,” Harzog says, noting that some who strategize to maximize points when using credit cards should also be sure to consider the overall total utilization.

She agrees with many credit experts who advise consumers to keep their utilization rates low to keep their credit scores stable or higher. “Thirty is the golden rule,” she says:

• You don’t ever want to be over 30% utilization.
• People who have really high credit scores have utilization under 10%.

Calculating Your Total Utilization Rate

For anyone who has more than one credit card or multiple lines of credit, here’s a quick guide to calculating your total credit card utilization. Just add the balances from all your credit cards – including company cards like The Home Depot – and then compare that to your overall available credit.

Follow this Step-by-Step Guide

1. List all of your revolving accounts, including credit cards and lines of credit.
2. Add up the total balances: Combine the current balance owed on each account.
3. Add up total credit limits: Combine the total credit limit for every account.
4. Divide your total balances by your total available credit.
5. Multiply that number by 100 to get the percentage.

Follow This Example:

• Card 1 has a $1,000 balance and a $10,000 limit
• Card 2 has a $3,500 balance and a $5,000 limit
• Your total owed is $4,500 with a total $15,000 limit
• Your total credit card utilization is 30%

How to Lower Your Credit Utilization Rate

Fortunately, there are strategies to lower your total credit utilization rate, including paying down a good chunk of your debt. If that’s not feasible at the moment, consider these tips for getting your rate lower as you work to build up your credit score:

• Ask for a bump up. Request a credit increase.
• Stop spending. Pause credit card use.
• Don’t overspend. It’s important not to max out your cards.

The Bottom Line

Ultimately, you want to maintain a low credit utilization rate (on individual cards and in total) because that’s what lenders want. The financial companies that can lend you money or extend a line of credit want to see that you are responsible with your credit and don’t spend a large portion of what’s available to you already.