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How Is My Credit Utilization Ratio Calculated?

Credit utilization is calculated by dividing your balance by your credit limit, for each card you have and for all of them together.
Credit Cards, Credit Score, Personal Finance
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Your credit utilization ratio is a measure of how much you owe on your credit cards compared with the cards’ limits.

This number matters a lot. Both FICO (the credit score used in most lending decisions) and VantageScore (its main competitor) heavily weight credit utilization while calculating scores.

Charging too much on your cards (especially if you max them out) is associated with being a higher credit risk.

Charging too much on your cards (especially if you max them out) is associated with being a higher credit risk. That’s why running up your cards will lower your score. A low credit score will make it harder for you to qualify for the best rates on loans, insurance policies and other financial products.

Calculating your credit utilization ratio

Per-card utilization measures how much of each card’s credit limit you’re using, while overall utilization takes all your cards and their limits into account. Enter the balance and credit limit for up to three cards in this calculator to see your per-card and overall utilization figures:

Per-card vs. overall — which is more important?

So which is more important, your per-card or overall utilization ratio? Trick question: Both are important. Credit scores can take the ratio into account in both ways — for each card and overall.

Scores can take credit utilization ratios into account both for each card and overall.

Why that’s important to know: If you try to counteract the negative effects of a maxed-out credit card by opening a new card and keeping its balance at $0, the high utilization ratio on the maxed-out card still may hurt your score.

Most experts say you shouldn’t use more than 30% of your credit limit on any one card. That way, the overall usage takes care of itself.

Tips for taming credit utilization

Strategies to improve your credit utilization include:

  • Spread your spending among your cards.
  • Set up alerts to get a text or email when your balance creeps up near the 30% threshold (or set a lower bar if you like).
  • Make several small payments during the month rather than letting charges build up and sending one big payment on the due date. If you get paid more than once a month, each paycheck can be a reminder to make a payment.
  • Consider asking your card issuer to bump up your credit limit, but only if it won’t tempt you to overspend and you think that your credit score is good enough to qualify. Jumping to a higher limit but keeping balances about the same will instantly lower your utilization ratio.
  • Keep in mind that per-card utilization counts. Retail stores, car repair shops and some medical offices offer credit cards as a financing option. However, these cards tend to have low limits, which can combine with your large initial charge to send utilization soaring. You score may suffer until you get that card’s balance whittled down.

Updated Aug. 30, 2017.