September 15, 2021

How to Keep Your Credit Utilization Under 30%

Credit utilization, or how much of your total limit you're using each month plays a major role in your credit score calculation. Here's how to keep it under 30% of your total available credit.

8 min read

Qoins Staff


Credit cards are a beautiful thing. It’s more of a love-hate relationship. You have this tiny plastic card that has lots of power on it and for some reason, you are able to spend that power. On the other hand, if you use it, you still have to pay it back, how rude. The real challenge is keeping the utilization under 30 percent. If you’re one of those people who literally use your credit card for everything, how is it possible you ask? We have the answers, don’t you worry.

Credit card utilization — or just credit utilization, in short — refers to how much of your available credit you use at any given time.

You can figure out your credit utilization rate by dividing your total credit card balances by your total credit card limits. The leftover percentage is a component used by most of the credit scoring models because it’s often correlated with the lending risk.

Most financial gurus recommend keeping your overall credit card utilization below 30 percent. Lower credit utilization rates suggest to creditors that you can use credit responsibly without blowing every cent you having and landing in debt, so a low credit utilization rate may be correlated with higher credit scores.

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How can I lower my credit card utilization?

Here are three tips that may help you lower your credit utilization:

1. Make your credit card payments more than once a month. This way, your balance never gets too high and you don’t have to pay a huge sum at the end of the month. Your credit card issuer will typically report your credit activity to the credit bureaus once a month. So, if you pay off a portion or even all — of your credit card bill before that date, you can lower your credit utilization.

2. Spread your charges across multiple cards each month. Using several cards will result in multiple accounts of low credit utilization rather than one account with high utilization. Don't forget, however, that certain credit scoring models will look at your overall credit utilization and/or the utilization on individual credit cards, so this technique may not always work in the end.

3. Increase your available credit. If your income has increased, you’ve maintained an amazing credit history, or you have little debt, it doesn’t hurt to ask for a credit limit increase just for fun. Just remember that this can sometimes result in a hard inquiry on your credit.

While experts recommend keeping your credit card utilization below 30 percent, it’s important to note that creditors also care about the total dollar amount of your available credit and not how much you are spending. If you find yourself in more credit card debt than you can handle, you might also consider finding a debt consolidation partner. This means that if you have a low credit limit, it’s not necessarily a huge deal if your credit card utilization rate is slightly higher than recommended, simply because your limit is lower!

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