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5 Tips for Lowering Your Credit Utilization
You can track spending, seek higher limits and set up balance alerts to keep your credit utilization under 30%.
Amanda Barroso Lead Writer | Credit scoring, budgeting, personal finance
Amanda Barroso is a personal finance writer who joined NerdWallet in 2021, covering credit scoring. She has also written data studies and contributed to NerdWallet's "Smart Money" podcast. Before joining the team, Amanda spent more than a decade covering issues facing many Americans, which includes her work as a writer at the Pew Research Center, a policy analyst at the National Women's Law Center and a college professor. Amanda earned a doctorate from The Ohio State University.
Lauren Schwahn Lead Writer | Personal finance, debt
Lauren Schwahn is a writer at NerdWallet who covers debt, budgeting and money-saving strategies. She contributes to the "Millennial Money" column for The Associated Press. Her work has also been featured by USA Today, MarketWatch and more. Lauren has a bachelor’s degree in history from the University of California, Santa Cruz. She is based in San Francisco.
Kathy Hinson Lead Assigning Editor | Personal finance, credit scoring, debt and money management
Kathy Hinson leads the Core Personal Finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications from the University of Iowa.
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Your credit utilization is simply the portion of your available credit you use, expressed as a percentage. It is the total of balances on all your credit cards divided by the total of all your credit limits. (It's also figured on a per-card basis.) This number is a big factor in your credit score — the less available credit you use, the better it is for your score.
Here’s how to keep your utilization low.
Why is having a low credit utilization important?
Paying your balances on time and in full every month is the best way to keep your score intact or build it. On the other hand, using a larger portion of your credit limit could do damage. Credit utilization accounts for around 20% to 30% of your credit scores.
But if a financial crisis means you have to lean on credit cards, take heart: Credit scores can rebound quickly once you're able to lower your utilization.
How to lower your credit utilization
1. Keep your charges on each card to a minimum
The simplest way to avoid losing credit score points for using too much of your limits is to watch how much you charge to each card. Make a habit of patrolling your online accounts to keep tabs on spending. If you are close to using 30% of your credit limit on one card, try to make a payment or switch to using another card.
Did you know...
Simply getting into the habit of paying twice per month instead of once could help you decrease your credit usage. Lower balances can save you interest if you carry a balance — and are good for your credit score regardless.
If it’s tough for you to avoid utilizing more than 30% of your available credit, another solution might be to request a credit line increase on your card or cards. Getting a credit limit increase might require you to call your card issuer or make the request online. Sometimes increases are offered automatically if you’ve had your card for a while and have a positive payment history, so be on the lookout for those offers when you log in to your account.
Another option to get a higher overall credit limit is to ask a friend or relative to add you as an authorized user on an established account. The primary user doesn't even have to give you a card or tell you the account number for your credit score to benefit. Do choose carefully: Being on the account of someone who is having problems with credit could affect your score, too. You want to be on an account showing good payment history, preferably with a high credit limit and consistently low credit utilization.
A higher overall credit limit could help you keep your credit utilization lower than it would be otherwise. This could make a big difference in your credit score. You can check your own credit to see the effect (and it won't hurt your score).
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3. Set up balance alerts to stay on top of spending
If you find yourself consistently overspending, setting up balance alerts can help keep your spending in check.
Sign up with your credit card issuer to receive alerts via text message or email. You can choose to be alerted when the balance reaches a certain amount or percentage of your credit limit. Your goal is to keep the balance below 30%.
4. Pay your bill before your issuer reports to the credit bureaus
Most credit card issuers report your balance and payment activity to the credit bureaus once every 30 days. However, this doesn’t necessarily coincide nicely with when your bill is due. If your issuer reports a few days before the end of your billing cycle, you’ll consistently look like you’re carrying a high balance — even if you pay it off in full just a few days later.
Place a call to your card issuer’s customer service line to find out when it reports to the credit bureaus. Simply pay off as much of your balance as you can in advance of that date every month, and you might see a jump in your score.
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If you have multiple credit cards, it might be hard to view the bigger picture of your credit utilization. Using the calculator below, input your credit card balances and limits to check whether you're under the recommended 30% utilization threshold.
If you’re creeping up to that limit, do your best to pay down your balances and explore ways to stop spending money.