The Relationship Between Your Credit Score and Credit Card Utilization Rate

The Relationship Between Your Credit Score and Credit Card Utilization Rate

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Credit card utilization is one of the most important factors credit scoring models use to calculate your credit score. You can figure out your utilization rate by dividing your total credit card balances by your total credit card limits.

To illustrate how important this factor is, Credit Karma sampled approximately 15 million Credit Karma members who visited the site in 2014 and compared their credit scores and corresponding credit card utilization rates.

Credit Score Chart


The graph above suggests that there is a strong correlation between credit card utilization rates and credit scores. Generally, those who had a lower utilization rate had a higher score and vice versa - with an exception for those with 0 percent utilization. The average credit score of those who had a utilization rate of 0 percent was actually lower than the average score of those who had a utilization rate of 1-20%.

What Does This Mean?

Lenders don't like high utilization rates because it tends to indicate there's a higher chance of you not being able to repay your debts. Keeping your credit card utilization low, preferably under 30%, is a good goal to aim for. Our data suggests an even better goal is to use your credit some, but keep the utilization rate under 20%. Creditors want to see proof that you can manage credit wisely--something you can't do without using the credit you're granted.

If you're uncomfortable with the idea of using your card for large purchases, you can still show an active credit profile by paying for small items with your card. It's important that you practice good habits when managing your credit cards. Charge what you can pay back and make sure your payments are on time. In order to keep your utilization rate greater than 0%, you'll need to let your charges show up on your billing statement, and then you can pay it off in full. This does not mean you need to carry a balance from one month to the next--doing so may just cost you money in the form of interest.

One of Many Potential Factors

Your credit card utilization rate is an important part of your credit profile and will likely have a significant effect on your credit score, but it's not the only factor lenders care about. The data and graph above represent the average, meaning it is possible for a person with high credit card utilization to still have a good credit score if other factors are positive-- it's just not as likely to happen. You can monitor your credit card utilization rate (and more!) for free at Credit Karma.

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I believe I'm the odd man out for I have a C for my total credit utilization yet have a score of 790 on Credit Karma, the other 2 companies have me in the 800+range which says the system is flawed. If I won 10M from the powerball my score wouldn't change, even though I would be better off, I'm better off now because I have no debt, yet partially penalized, but I don't worry about my FICO score, because I'm able to use cash.

i think credit karma is 100% fantastic I live it and recommend to my friends because it can help a credit challenged person

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Thanks for your kind words!

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Enter Your Reply This is absolutely true! Only CKarma was able to provide the RIGHT advice to turn things around. You must read everything meticulously and repeat your visits to review tips you may overlook. If you learn and follow you will be anazed! Ither sites do NOT compare.

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I read a gazillion articles about credit, utilization, improving credit etc. I will give you my take on my personal experience. I believe yes, there is an algorithm but I believe that it differs from person to person and your credit habits, problems, financial situation, etc. So each credit report is unique to a person and what you do in terms to increasing your score is up to those "components" from what I researched and found out that there are over 200 different things are being looked at job, residence, payment history, accounts, etc. They all will differ from person to person.

6 years ago I fell into the credit slump the entire country was in, 2 cars repo'd, collections, etc. My credit was shot to a like 510 or something. So the last 4 years I started picking up the pieces to rebuild my credit.

To start I took out a loan at a buy here / pay here lot that reported to Equifax at 22.9% APR. Orchard Bank was kind enough to get me an unsecured card for $300. I then was approved for a BofA secured, then went to Wells Fargo secured and Fidelity. So now I had a car loan 3 secured and 1 unsecured card with hardly any limits.

I did the whole 10% utilization game by paying multiple times a month and always PIF before statement date. Did this for about 12 - 15 months. I got BofA to unsecure my card, change to a rewards card. I got a Cap 1 blank check pre approved auto loan for $30,000 but when I went to the dealer they beat that rate with GM Financial for 2% lower APR and less money down. So I took it, then bought a second car with the Cap 1 blank check.

Now I paid about 8 months. I then went on a app spree applying to as much cc as I could to see what I could get, yes I was a little methodical about it but I got approved to about 10 CC's

Barclay, Cap 1 Quicksilver one, Cap 1 Spark, Nordstrom, Macy's, Amazon Store, Fingerhut, and now Walmart and Target Red credit card. My Fidelity unsecured after 10 months (their policy is to review after 15 months) and they added $250 plus removed annual fee.

When I got approved for my Target, Walmart card I had 23 inquires on my report on Equifax, about 10 on TU and about 16 Experian. My current score are about 646, 648 and 656 between the 3.

What I found out for myself that banks look a lot at your credit management, payment history is one part of it but how you used the cards. Does your spending pattern indicated that you are desparate for money or if you have a lot but the limits are just too low. What I mean by that. I let my utilization go up on several cards to about 70% and let it report to the CRA. Then paid most of them to 0 and the other down considerably. I did this with all my cards and in different patterns.

This is where I found my biggest jump in credit score at one time +10 at once.

My fingerhut account I have a CL of 1200 carry a balance of 700 (min payment $46 but I pay $100)

Most of my CC have a $1000 CL so on a few I reported a $700 balance, $500 balance, on my $500 CL card I reported a $280 balance, Amazon $400 reported $248 and so on.

yes my credit score tanked by like 3 - 6 points but the next month it shot up when I made the big payments on all of them.

So my moral to the story is that everyones credit and financial situation is unique dependent on countless factors but what I gathered is that if you use your credit in a pattern that demonstrates that you use it only to avoid to pay cash but you actually have it. They will extend you credit. You can show it by making multiple payments per month but charging frequently. It will show a pattern that you know exactly what you are doing.

Utilization, Inquiries, all of it matter in a the grand scheme of things but I think what really matters is the big picture because ulitmately that is what the credit report is suppose to give a lender - the big picture - are you a responsible borrower and do you know how to manage your money. If you only pay a little bit and charge a lot shows the bank you over extent yourself, if spend frequently and make lots of payments display the banks that you simply just using your credit as a tool but really only spend the money you have cash and then just pay it of.

I work in technology so I can say with confidence that banks use technology for risk managment. If you ever look at some of your credit reports, they also report what payments you made, how many time per month, what you high credit was, when you made the payments (in my case they will several per month), how much money you make, what type of credit you have. So if Bank of America gives you $1000, it may signal to another bank, if they give you credit then they may should give it to you too. Nordstrom asked me to give them a valid CC# to verify my identity but I think they use it assess your credit as well.

So the big picture is to prove to banks, that you do not NEED credit but you use it instead of your cash even though you have but you prefer to may lump sum payment. Ultimately these banks make money off each and every swipe you do at the stores which means money to them. You not using that them and not that often is no benefit to the bank. you using them all the time, allows them to make lots of money. The interest they charge you by carrying balance is just a secondary stream of income!

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dbat, Very interesting perspective, and some things I never consdiered. Your take on the "mysteries" of  scoring alogorithms make a great deal of sense - certainly, these seem to have worked out well for you. 

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Enter Your ReplyA lot of what you say is true, but I believe the rating system keeps the average scores lower, so the banks make more money in interest. I see credit for most people, is just a trap to lock you into making monthly payments to the banks each month. I have taken on $8,000 in credit card debt over the last 8 years, after a bankruptcy, high medical bills.   I have never missed a payment and have watched my credit score yo-yo. I received credit card ofers of 14-18% right after bankruptcy. Now the best I get is 22%, most are 24-27%. even thought my score is 100 points higher @ 635. The only car loan I can get is 17%, are they crazy on a secured loan? No way. I have not had a car loan since 1986 and I am sure that is hurting me, but the banks do not care. I have purchased 8 cars since 1986, all for cash. I will be paying off the credit card debt over the next 18 montrhs and will never have more than 0 to 20%. My advice is keep CC debt below 20% and only use credit for a car or house period. That will allow me to bank 50% of my social security when I start drawing in 2.5 years and live on my pension. Experts say wait until age 70 to get SS, because you get a bigger check. I will get $60,000 from age 62-66 and have $30,000 in the bank. And from age 66-76 I will be saving another $75,000. Then I will not need credit for anything.   

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Thanks for your insight Dbatl2012. I just wanted to expand and share some issues most people don't know about. i used to own an electronics store and many years later I sold it. The reason banks LOVE you for using their cards frequently is because the STORE has to pay between 2% and 4.5% when the card is swiped. Corporate cards are even worse and add 1% or 2% more to the transaction. Discover and AmEx are both extremely high percentage cards. That's why you often see stores, especially small ones, that only take Visa and Mastercard. The percentages don't sound like much but for example: your purchase is $100 and the corp. card charges the store 5%, the store just paid $5.00. Now your purchase is $1000 so the store pays $50.00. Then your CC adds salt ot the wound and charges you interest. Set your cards on autopay for the minimum if you have to or if you have problems keeping track of due dates. If you want to pay more then go for it. If you can't add any extra then you just let your CC autopay do the job for you. Of course you're paying the minimum but you don't ever have to worrry about forgetting. If you don't have the money to pay the minimum and you don't want a bounced transaction added to the mess, then just turn off autopay. The autopay option is only for those who pay online but it certainly helps if you tend to lose track of the days and you have several cards. I hope this helps people understand one of the reasons your CC wants you to use your card as often as possible. You can help the smaller stores out if you're paying with your Debit Visa or Debit Mastercard. If you use it as a Debit Card and just enter your PIN, the store will only have to pay $0.25 to $1.00. NO! THE STORE DOESN'T AND CAN'T KEEP TRACK OF YOUR PIN. There are tons of laws against that and the PIN NEVER shows up on any report the store has. Please don't make the "Small Guy/Gal" pay 4% when it could only cost a quarter. Support the small stores when you can. Thanks and good luck folks!

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You failed to mention that, even as you pay down your balance, credit card companies like to reduce your credit limit at times - keeping your utilization rate high, your credit score low, and subsequent interest rates high.  A win for them at your expense with this stupid credit score game.

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that's exactly what Wells Fargo just did to me... i have joint checking, joint savings, a mortgage, an unsecured personal loan (which has auto pay out of checking), and a Visa... they just cut my credit line on the cc by $1250! For NO reason... i am NEVER late on any payments, always pay more than the minimum... i just disputed a car lease which i do not have, since i traded my car in for a hybrid purchase... reports still showed i had BOTH the loan and the lease (didn't know for 3 months)... my utilization dipped from 30% to 30.667% (which they rounded up to 31%) and triggered WF to reduce my credit limit, putting my Visa at like 99% utilization! i called, and the credit rep told me that they would have to do a hard inquiry to restore (which of course will also count against me), so i should wait until i'm sure the lease is off all reports (a month to 45 days) - in the meantime, my score continues to drop and the other cc/banks will probably flag me as more of a risk... this is the kind of BS that they play at your expense, most definitely

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I also feel that some of these "Important/Critical" rating factors do not make sense.  Lets' use my current situation as an example.  My overal card utilization is 5%, we owe less than 30$K on our 160$K house, have 86$K in our pass book savings and money market accounts, not to mention long term savings, investments and "hard currency" gold and silver and diamond caches, and yet my score dropped from 736 to 716 because my credit limit at Kohls is $800 and I used $736 to go Cmas shopping-inspite of the fact that my history at Kohls will verify I never run a balance for more than four months!  The LOWEST bank card credit limit we have is $14K (!) with our largest limit being $25K!!  The only reason we dont' have a larger limit with Kohls is that we have never asked for a limit increase in the four years we have had the account.

Absolute rampant stupidity in my opinion.

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That is exactly what happened to me also.  My limits were reduced to nearly the amounts existing on my accounts.  This also caused my interest rates to increase.

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It's a pretty sick game.  While many times high utilization rate coorelates to those who don't often pay back or pay back in full it's not always the case.  I am a loyal and consistent user which provides me with a lot of bonus points for flying.  Ironically sticking to one card (generating the credit card company income on my purchases) is damaging to credit score.  

As someone who pays in full every month, and has never missed a payment, I'm penalized.  But even worse, the lower they can push the score of people who may not be in my situation, the lousier cards they are able to offer, which make them more profit.  They can attempt to do this to users like myself, but instead I simply lost my loyalty and my score is pushing 800 again.

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Completely agree! On one credit card I had a 4500 limit, never used more than 1500 of it as I was paying down they lowered my limit to 1500! so debt ratio changed and score changed . What a joke these companies are! AND of course they did this while I was in process of buying a home! TG my credit had been run and financing preapproved prior to this little action. But I can definately say that when I get this card paid off I will never use it again. Care-Credit Card holders beware!

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At a credit repair clinic I attended the leader said to get a credit card and use it all the time and pay on it weekly. He said you buy gas, pay your electric bill, buy groceries, right? He said to raise your credit score...... You have $100.00 to use for groceries. You go to the grocery, charge $100.00 on your credit card then take that $100.00 put it in the bank, write a check or use your debit card and pay $100 on your credit card. YOu do that with all of your bills you are paying for anyway. Charge it and then make the payment. So in a months time even though you may have a $500.00 balance if you charged your groceries, gas, electric bill, phone bill, water bill and pay it back with the money you were going to use to pay it you may have charged twice the $500.00 limit on the card. YOU CANNOT HOWEVER CHARGE IT AND THEN SPEND THE CASH AND MAKE MINIMUM PAYMENTS. YOU HAVE TO CHARGE IT AND PAY IT CHARGE IT AND PAY IT..............

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i do like what you said , it is the only one i understood, charge and pay.

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I was at first upset that my utilization grade was a "C" even though I don't use any of my cards and they are all 0 balances.  My only actual debt is my house.  I realized that Credit Card companies don't like people like me because they don't make money.  You won't get a good credit utilization score unless you are GIVING AWAY YOUR MONEY to the credit card company.  I also realized that my overall score is just fine without having a good score on the utilization.  Why should we give our money away just so they will give us a good score?  We've been brainwashed into thinking that our credit score is directly related to our worth as people.  Unfortunately we do need a credit score to buy a house (unless you save for a long time).  But really, is the extra little bump from the credit utilization going to make the difference of being able to qualify for a really good rate on a house?  I think not.

Just my $.02

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I agree with you. I think that credit card companies ramrodded this ruling to make more money off you. I think that I may have to ask my credit card company to lower my credit limit so I can look better on paper.

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Not quite. You don't have to pay any interest to have a good utilization ratio. The utilization is based on your last statement balance, but if you pay off the entire statement balance before the due date, you won't be charged any interest.

For example, say my card has a $1000 limit and my statement balance at the end of January is $200. My utilization is 20%. As long as I pay $200 before the due date (say February 25th), I won't be charged any interest. Now let's say I charge another $300 on the card to get my balance to $500, but then I pay $200 on Feb. 20th. I won't be charged any interest because I paid my balance of $200 in full, and my next statement balance will be $300, and my utilization would be 30%. Now if I couldn't pay off the full $200 by Feb. 25th, then I would have to pay interest on whatever my balance was.

Also, the credit card companies aren't the ones that determine what goes into a credit score

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I once read an article about a guy who was in charge of his company's credit card. They always paid their balance off in full each month, this resulted in an unimproved credit score for the company. It's not credit if you pay in full each month, just borrowing. He said that the compnay couldn't get a loan if their life depended on it due to a lack of credit history. So, I have always left between 5%-20% of my total credit limit at the end of each month (although I could very well pay it completely off), just so that credit companies see that I can borrow but then pay back the money responsibly. Hope this helps :b BTW I have grade A in credit utilization (20% utilization) with this method.

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This was most helpful to me because I was on a mission to payoff all my credit cards & did. My credit score & utilization grade dropped & I didn't understand why but I do now. So I will make little purchases & pay them off when the bill comes in.

Great tip. Thanks Credit Karma

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Paying them off every month doesn't help as much as almost paying them off every month, just before the bill is printed.  For one of my cards, the bill comes on the 10th and is due the next 5th. I use it for some, not all, purchases I would've made anyway, gas groceries, etc. On payday (1st) I pay an amount that is more than the previous statement balance but less than the current balance. It's paid on time, I don't get charged interest, and there's small balance on the next statement. Credit cards are the only bills I don't pay as soon as I get them. I pay them near completely on the next payday, a few days before they're due.

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Credit Karma's new system is flawed.  I have 100% on time payments, am using 24% of my TOTAL credit, no bankruptcy or collections, have a history of over 7 years, and about 8 credit inquiries.  Yet, my scores are only about 650.  I am essentially being penalized because I am currently taking advantage of several credit card offers that have very low balance transfer points (4% or even less).  Because I transferred as close to the max as possible on several cards, I am being severely penalized, even though my OVERALLL credit card utilization is acyually very good and well under 30%.

I have an A or B in every criteria except inquiries, yet, i'm technically below the median.

I find it difficult to believe that someone with my credit behavior over my history is barely average. 

Credit Karma Team
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Hi Salvo007,

Credit Karma does not calculate your credit score, so we don't have insight into the fluctuations of your score. However, please keep in mind that utilization has no "memory", if you pay down your cards to a more moderate level, you should see your score rise. 

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Well, thanks to so many great sites like Credit Karma with such great tips, I've been helping friends, family and myself improve credit scores. I must share one tip in an article that I found on a different site really enlightened me or, at least it looks like it did. I've seen most websites posts stating, "keep it under 30% utilization." Well, I called up a few credit card companies and they said, no, just use your credit as much as you want, pay it off at the end of the month or make the minimum payments and you're fine with us. So, here I'm thinking, what's really true to get the best score and almost max out the card and pay it off monthly to demonstrate that you can handle $xxx payments a month, in hopes of getting a higher limit faster? I was thinking with lets' say $1,000 limit and only charging $100 for x months and asking for an increase might be silly. Well, going back to that great tip I think I found... The "credit expert" advised something that I haven't seen on any other website/book. She said, fine, run it up high if you want however, pay it off within enough days of closing to make sure that you're 1 to 10% of utilization. This way you're showing that you can handle higher level of charges and responsible enough to pay it off in about 30-45 days. The rest of the remaining 1-10% you can pay off after the statement closes. Okay, I tried it and yes, it works. Credit card companies usually post the closing balance onto the credit reports. I've been testing this theory with friends, family and my scores and, it works! ;)

It really depends on the day the the credit card companies report and your cycle date.

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It is best to utilize less that 10% of your card and have your account set to automatically pay the entire balance monthly.

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I have been using the same trick as you have found out of maxing out your CC and paying it off before due date. And it has definately helped. At a point where chase was denying me of Chase freedom i applied BOA CC with CL of $2000. Maxed it and payed it. Maxed it again paid it again. The complete amount before due date.

Three months later i apply for chase freedom again and this time they approve me for $6000 came to me as surprise (in less then three months with average age of accounts 1 year 1 month thats all)

So yes it definately works, cuz now you show you are a high roller but just before the due date you drop the utilization rate to lower than 10-20%.

But where this trick failed (not exactly) and as corrctly mentioned by Credit Karma Moderator. It depends on the days the credit card companies report, cuz as i was following this i was late in paying by a day. Mind it i did not cross the due date it was like a day or 2 days before the due date. But i guess within that one day my CC companies reported to Transunion and others with a maxed out balance. This made my Credit score to drop. So from a usage rate of below 10% to usage rate of 60 and above affected my score. (Again, i did not cross my due date.)

Its just my CC company reported just before i payed the amount. The companies do not have a fixed day to report neither do they report after your due date. It fluctuates though not to much but a day or two.

So nothing wrong with this tip. Great one actually just letting you know what happened to me. 

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Yes, I kind of don't like that I'm supposed to keep a 1-10% balance on my card.  I have two credit cards with a total of $57k credit limit.  I only use one of the cards.  My monthly charges on the card range between $4k and $12k.  However, I've been paying ahead of the charges to the tune of about $4k.  I always have a positive balance on my credit card because of this pre-paying.  I thought that If I kept a zero (or in my case a positive) balance, that would help my credit score (which has been 768 for the last six months).  I guess I'll have to leave 1% balance on the card.

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I know on what day my credit card companies post to the credit reporting agencies and I pay them off in full every month at least 3 days before the posting date so I show a low utilization.

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well, NJChas's iv'e been watching my credit score & the one problem is, im only using whats nessesary and paying it off in a timely manner. well, the last report from credit karma did not post my utilization of cc, it said 0% utilization which was not correct. which lead to the utilization of card to drop points. now, what im trying to figure out is; who would be the one who missed my spending the credit card co. or credit karma???

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Of course the Credit Card Companies are going to tell "charge it on up" and pay it in full or the minimum.  They have learned from experience, roads leading to Rome are not paved in gold for too long.

You intend to pay it in full each month, the car needs tires..."charge it", you'll pay it off in full next month, but then the A/C in your home goes out...put it on the card", I'll divide the cost by 6 months. 

In the 3rd month your child needs Braces to the tune of $6000.  Yep! Rip the ol' card out of your wallet and because this is a emergency, you'll stretch it out for 12 to 18 months...but nothing else is to be charged with that Mastercard, right! 

Hello Visa!  I have a lawnmowe, edger and weedeater to put on you, but I'm going to pay it off in full as soon as the bill comes......Most debters have a relative named Murphy whom seems to visit them a lot.  He even lives in their spare bedroom in some cases.  This scenario goes on like this for 4 or 5 years and one day you wake up, go to the mailbox and open the Mastercard, Visa, Discover and Sears and can't believe what you see!   You owe $40,000 to $50,000.!  I know because I have been there. Mine was $57,000 4 years ago. Now I'm down to $9400 at 3.92%.  Minimum payment is $125, but I pay $300 every month and will have it paid off in about 28 months.  I have not charged anything on the card since I've had it, just paying down a few balance transfers from 0% to 10.24%, but $6750 of it is at 2.99% until paid off.  The blend rate on the $9400 is the 3.92%

I have 5 other credit cards with 0 balances.  I don't use them but don't want to affect my FICO and Utilization rate by closing them.  Hope this gives ya'll something to ponder.

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I have three credit cards. I called up all three CC companies and confirmed that the date in which they report to the credit agencies is either the last day of my billing cycle (not due date) or the day after.

I synced all my credit card billing cycles and always pay off all my balance before the end of the billing cycle, thus showing 0% utilization to the credit agencies.

I think the information you gave out is incorrect. One of the card companies have told me that they report my last payment date and the amount which means that the credit agencies are well aware of the fact that I am using my credit card and the utilization is showing 0% only because I pay them all up each month.

I signed up for credit watch on and they say that my low credit utilization (0%) is helping my credit. Please let me know whether your information says I'm right or wrong.

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