30% Credit Utilization Rule: Truth or Myth?

Using no more than 30% of your credit limits is a guideline, not a rule — and using less is better for your score.
By NerdWallet 
Edited by Kathy Hinson

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Many credit experts say you should keep your credit utilization ratio — the percentage of your total credit that you use — below 30% to maintain a good or excellent credit score.

Credit utilization is a major factor in your credit score, so it pays to keep an eye on it. View the 30% rule as a good guideline, but be aware that using even less is better for your score.

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Keeping up with what percentage of your credit limits you're using is easier than you may think. You can set up alerts with your credit card issuers to track your balances. Or sign up for a free credit score that displays utilization rates.

How much of my credit should I use?

If there's no bright line, why the 30% rule? It’s likely because the recommendation to keep your credit utilization low invariably prompts the question, “How low?” Having a number gives you an upper limit when thinking about how much to spend on your credit cards.

The 30% answer finds backing from the credit bureau Experian: "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 senior director of public education and advocacy. "The lower a person’s utilization rate, the better from a scoring standpoint."

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, a senior director for FICO.

Credit utilization and your score

How much you owe on your credit cards relative to your credit limits makes up about 30% of your FICO score. VantageScore, a competitor scoring model, calls credit utilization "highly influential."

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

And, happily, damage from credit utilization is easily reversed. With the vast majority of scores, as soon as a new, lower balance (or lower credit utilization) is reported to credit bureaus, the harm is undone.

What's next?

  • Sign up to get your free credit score and report from NerdWallet. Information is updated weekly, and the factors affecting your score are broken out to make them easier to understand.

  • Learn how you can manage your credit with NerdWallet.

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