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.
NerdWalletOct 28, 2021

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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.

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 and/or get regular reports from personal finance sites on how much of your credit you're using. NerdWallet's report is free and updates weekly.

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Myth or guideline?

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?” 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, 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, while VantageScore says credit utilization is "highly influential." (Check out your free credit score to see how you're doing on utilization for your specific credit card accounts.)

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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