Chris O'Shea
Your credit utilization ratio is a vital part of your credit score. It is the total amount of debt on your revolving credit accounts compared to your total available credit, expressed as a percentage. Here’s what you should know about credit utilization and how to keep it from hurting your score.
Difference Between Per and Total Credit Utilization
Your ratio is made up of both per-card and overall credit utilization.
- Per-Card Utilization. Refers to how much of each card’s limit you’re using.
- Total Utilization. Is how much debt is on all of your cards compared to their total limits.
Both are used as a factor in your credit score. For FICO, credit utilization accounts for 30 percent of your score. For VantageScore, it accounts for 20 percent of your score.
Below 30%
If you want your utilization to help your credit score, a good rule of thumb is to keep it below 30 percent. However, if you want to help yourself out, try to keep that number in the single digits. How do you know your ratio? You can use a credit utilization calculator or follow this simple equation:
- Add up the debt on every credit card
- Add up the limits on all of those cards
- Divide the total debt by the total credit limit
- Multiply that number by 100
Keep it Down
You can keep your credit utilization low by making payments on your cards throughout the month, not just at the end of the month. Why do this? Because lenders tend to report balances at the end of each month. If you pay it down each week, you’ll have a better shot at having a lower balance and, thus a lower utilization. You can also call your lender and ask for your limit to be increased as a way to boost your utilization ratio.
Do One Thing: Make sure your credit utilization is as low as possible. It’s an easy way to help keep your credit score in good shape.
Jean Chatzky
