What credit utilization is
Credit utilization is the share of your available revolving credit you're using. If your cards have a combined limit of $5,000 and you owe $2,000, your utilization is 40%.
How to calculate it
Utilization = total card balances ÷ total card limits × 100
Scoring models look at your overall utilization and at each card individually, so one maxed-out card can hurt even if your overall number is moderate.
Why it matters
"Amounts owed," which includes utilization, makes up about 30% of a FICO® Score. Lower is generally better, and many experts suggest staying under 30% overall. Because utilization is based on your current balances, it can improve as soon as lower balances are reported.
Your card statement balance is usually what gets reported. Paying down a card a few days before the statement closes can lower your reported utilization that month.Lending tip from the Loanify Editorial Team
Ways to lower utilization
- Pay balances down, starting with cards closest to their limits.
- Make a payment before the statement closing date, not just by the due date.
- Keep older cards open, since closing a card removes its limit.
- Consider consolidating card balances into a fixed-rate installment loan. A Loanify consolidation loan moves debt off your cards, which can lower utilization.
Frequently asked questions
Does a personal loan count toward utilization?
No. Utilization measures revolving credit like cards. Installment loans are counted differently.
Is 0% utilization best?
Very low utilization is good, but showing some small, on-time card use can also help demonstrate active, responsible credit.
More guides
Soft vs. hard credit inquiry: what happens when you check your rate
How a personal loan affects your credit score
Debt-to-income ratio explained
About the Loanify Editorial Team
Our guides are researched, written and fact-checked against federal lending rules, CFPB guidance and current loan terms. Every payment example is calculated with the standard amortization formula. Read our editorial policy.