Most people know that their credit card balances affect their credit scores in some way. But you may not be aware that your balances impact your credit scores directly.

The credit industry calls this “credit card utilization.” It sounds like a $10 phrase, but all it really means is how much of your credit you’re using. Simply divide your total credit card balances by your total credit card limits.

Most credit scoring models from companies like FICO base your credit scores on your “utilization ratio” in part because it’s a strong indicator to lenders of the risk you won’t make your payments on time.

Why Your Credit Card Balances Affect Your Credit Scores

As we said above, your utilization helps lenders predict how likely you are to pay your bills.

Someone who is constantly charging as much as they can, using up to or even going over their credit limits, is more likely to default on their loans and credit card payments.

So, to lenders, the lower the balances you carry from one month to the next, the more likely you will be to pay them.

How Much Does Your Credit Usage Impact Your Credit Scores

There are a lot of different credit scoring models. Even FICO has dozens. That means it’s hard to predict exactly how much your credit utilization will impact your credit scores.

But one thing is for sure: it will.

In general, the more of your available credit you use, the more likely it will be to negatively impact your credit scores. It usually goes something like this:

  • Zero impact (good or bad): 0%
  • Best range: 1-9%
  • Still good: 10-19%
  • Okay: 20-29%
  • Risky: 30-49%
  • Danger zone: 50-79%
  • Red alert: 80-100%
  • Disaster: over 100%

We, as well as most other credit experts, recommend keeping your credit utilization below 30% no matter what.

If you’re using more than that now, you already have your first step toward optimizing your credit utilization.

It’s Not Just Total Utilization, Either…

On a related note: Your individual balances matter, too. While some credit scoring models only look at your total utilization, others factor in each account.

So, if you have just one card maxed out, that can still impact your credit scores.

For example, you have five credit cards, but one has a much better interest rate, so you only keep balances of less than 10% on your other four cards, but 80% on the “good” one.

You might think you’re saving money, but you’re actually probably costing yourself in the long run by lowering your credit scores.


These are just the absolute basics for understanding and managing your credit card balances, aka, utilization. Anyone can try this general advice, but your credit is as unique as you are.

If you want to find out exactly what credit-building strategies would work best for you, get in touch with one of our credit experts today.

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