Advertiser Disclosure

5 Tips for Winning the Credit Utilization Game

Credit Cards, Credit Score, Personal Finance
With so many websites offering free financial tools, it can be hard to know who to trust. At NerdWallet, we spend literally 1,000s of hours researching partner offers and following strict editorial integrity to match you with the perfect choice. We even share how we make money so you can enjoy our expert advice and researched recommendations with total clarity and confidence.
shutterstock_198622655

It might unnerve you a bit to think of your credit as a game. While it’s true that your credit score is a very serious matter, being strategic about managing it certainly starts to feel like a sport after a while.


Credit score simulator

What happens if…

I pay off this much debt:

Get your score!

Your new score:


Consider the following: Many people are distressed to learn that even though they pay off their credit card balances in full each month, they’re still getting dinged on the amounts-owed portion of their score. This is because exceeding a 30% credit utilization ratio at any point in a billing cycle on any one of your cards could do damage.

But there are tactics you can use get around this problem; in other words, you can win the credit utilization game. Here’s how.

1. Be aware of how much you’re charging to each card

The easiest way to avoid losing points on your credit score for overusing your available credit is to simply be aware of how much you’re charging to each card. Make a habit of patrolling your online accounts to keep tabs on your spending; if you start approaching 30% utilization on one card, make a payment or switch to using another card.

Your credit utilization is generally calculated based on your total outstanding balances compared with your total credit limit across all of your cards, but some scoring models also penalize you for exceeding 30% utilization on any one card. Make it a rule to keep your balance below 30% on all of your cards at all times to kill two birds with one stone.

Here’s a calculator to help you figure your utilization, both per-card and overall:

2. Set up balance alerts

If you have a hard time remembering to check your accounts online, technology can help. Sign up with your issuer to receive balance alerts via text message or email. This way, you’ll be sure to know when you’re getting close to the dreaded 30% utilization threshold.

Pro tip: Set the alert to let you know when your balance reaches 20% of your available credit. That way, you have a little cushion of time to take action before hitting 30%.

3. Raise the credit limits on your cards

If it’s tough for you to avoid utilizing more than 30% of your available credit before the month is up, another solution might be to request a credit line increase on your card(s). For example, if your credit limit is currently $5,000, but you usually charge $2,500 to your card every month, you’re regularly hitting a 50% credit utilization ratio.

But if you raise your credit limit to $10,000, you can spend the same amount every month and only get as high as a 25% balance-to-limit ratio. This could make a big difference in your credit score in the long run.

Be aware that requesting a credit line increase from your issuer might initiate a hard inquiry to your credit report. This might cost you a few points on your credit score in the short term, but as long as you’re practicing good credit habits, it should bounce back quickly.

4. Find out when your issuer reports to the credit bureaus

In general, most credit card issuers report your balance and payment activity to the credit bureaus once per month. 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’re going to pay it off in just a few days!

But this can be solved by placing a quick call to your card issuer’s customer service line and asking when they report 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.

Nerd note: I called my credit card issuer’s customer service line to test out this trick and found that they report to the credit bureaus on the last business day of each month. Since my bill is usually due on the 10th, I’m sure my credit utilization looks pretty high every time the credit bureaus collect information about me. I’ll be paying as much of my bill as possible before the last business day of the month from now on.

5. Get into the habit of paying mid-cycle

If all of these tips sound too fussy to you, simply getting into the habit of paying your balance twice per month instead of once could be enough to do the trick. As long as halving the time between your payments will consistently keep you below a 30% credit utilization ratio, setting up automatic twice-monthly payments to your cards is a fine idea.

The bottom line: Keeping your credit utilization in check will go far in helping your credit score. Of course, it’s important to pay off your credit card balances in full every month, but employing a few of the tactics above could build your credit even more.

Credit card with game image via Shutterstock

This article updated Nov. 4, 2016.