30% Credit Utilization Rule: Truth or Myth?

Using less than 30% of your available credit is a guideline, not a rule. The less credit you use, the better.

NerdWalletFebruary 5, 2019
How Long Will a High Credit Utilization Ratio Hurt My Score?

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Credit experts trumpet the axiom that you should keep your credit utilization ratio — how much of your total available credit you use — below 30% to maintain a good or excellent credit score.

The truth is, there is no ideal credit utilization ratio that will make or break your credit score. Below 30% is a good guideline for most consumers, and the lower the better for your score.

Let’s take a look at the facts.

Myth or guideline?

So why the 30% rule? It’s likely because the recommendation to keep your credit utilization low invariably prompts the question, “How low?” The 30% answer finds some backing from the credit bureau Experian.

Experian uses the VantageScore, which is a competitor to the traditional FICO score. "The 30% level is not a target, but rather is a maximum limit. Exceeding that level will have significantly negative impact on credit scores," says Rod Griffin, Experian’s director of public education.

"The lower a person’s utilization rate, the better from a scoring standpoint," he says.

The FICO scoring model seems to agree with this conclusion. “Consumers with FICO scores of 800 use, on average, 7% of their available credit,” says Can Arkali, principal scientist for FICO.

Credit utilization and your score

How much you owe on your debts relative to your credit limits is a factor that makes up 30% of your FICO score, while VantageScore says credit utilization is "highly influential." (Check out your free credit score.)

Note that your credit score is composed of a number of factors. If your overall credit profile is in excellent condition, it’s unlikely that your credit score will plunge if your credit utilization ratio rises to 31% one month.

But if you occasionally miss payments, have too many inquiries on your credit report or are new to credit, then utilizing more than 30% of your available credit will likely have a more harmful effect on your score.

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