The Relationship Between Your Credit Score and Credit Card Utilization Rate

We generally make money when you get a product (like a credit card or loan) through our platform, but we don’t let that cloud our editorial opinions. Learn more about how we keep this compensation from affecting our editorial views.

The Relationship Between Your Credit Score and Credit Card Utilization Rate

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

Findings

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. If you're a Credit Karma member, you can get free credit monitoring of your TransUnion and Equifax credit reports, meaning we'll alert you after significant changes are made.

Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Use this form to report it to our editorial team. For questions about your Credit Karma account, please submit a help request to our support team.

Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

All Comments

Results 71-80 of 239Results per page: 5 | 10 | 25Page 8 of 24   Previous | Next
1 Contribution
0 People Helped

As far as credit score goes... do without the cards that don't report.

Then again, if you have good enough credit to keep a card with no spending limit and aren't being denied for other loans you really must have, why even bother worrying about your score!

Top Contributor
12 Contributions
3 People Helped

From my reading and experience the best way to raise your score is good ole fashioned patience and responsibility. Focus on eliminating the debts that cost you the most interest first so you end up paying less in the long run. A consolidation loan can be the answer but be wary of fees and high interest rates.

1 Contribution
0 People Helped

Hi,

Any idea on what to do if we have credit card with no access limits? I found about it just now and have been using chase card pretty safely for last 3 years.

Is there any way to recover from lost credit rating? the credit card manager says she will correct it by talking to the credit union. not sure what she will do.

Can i file something with the credit unions for rectification?

1 Contribution
0 People Helped

Hello,

My husband and I both have good credit scores (700s) and are very responsible with our credit (no late payments, etc.). We have "A" ratings across the board on our Credit Karma report cards, except that we both have a "D" for Total Accounts. We each have about 4 open accounts and 5 closed accounts, so we each have a total of 9.  These accounts are not joint accounts, so they are not the same. My questions relate to how adding each other as authorized users on each other's credit cards would impact our credit scores (we trust each other completely).

1) If we both have 4 credit cards, and we add each other onto one another's, will we then be counted as having 8 open accounts each and (therefore increasing our credit scores)?

2) My husband has a "C" rating for his average age of accounts. His is 5 years and I have an "A" rating because mine is at 9 years. If I add him onto my long-standing credit cards, will that increase his average age of accounts (and increase his credit score)? Will me being added onto his shorter-term accounts decrease my average age (and decrease my credit score)? (Or perhaps the increase in my credit from increasing my total number of accounts will counteract any decrease in my credit score from lowering the average account age?)

3) We each have low credit utilization (2-4%), but just so we know, if we each have about $25k in credit limits each, would adding each other onto our cards double the total credit limit we each have to $50k? Would that then factor into our credit scores and therefore cut our credit utilization in half, down to 1-2%?

4) Are the answers to these questions different depending on whether we add one another as "authorized users" versus "joint account holders"? We've spoken to a few of our credit card companies and they don't "do" joint accounts - just the authorized user thing.

Thank you very much for your help! We are really trying to increase our credit over the next 6 months to be able to get the best rates when buying a home. 

1 Contribution
0 People Helped

I use my credit card everyday and pay in full before due date, why do I have a 0% utilization here? 

Reply by
Centaur

2 Contributions
0 People Helped

I have the same thing - use my credit cards each day and pay before the due date and it shows a 0% utilization.  (And I use them for everything so it adds up - I just ALWAYS pay it off so I get a "loan" from them and the rewards back).  

Reply by
brvoltz

1 Contribution
0 People Helped

Don't feel back, I have a postive balance on my credit card of around 200, for months and my utilization is 0%, but have a C rating.  I think Karma or the reporting companies have a bug.  I had an A rating when the balance was zero, not a postive number, which has caused my rating to be lowered.  Go figure....

2 Contributions
0 People Helped

What is HELOC? 

Top Contributor

Reply by
chief0

14 Contributions
5 People Helped

A home equity line of credit (often called HELOC and pronounced HEE-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house.

2 Contributions
0 People Helped

Sorrry,  I'm new here. What is HELOC ?

1 Contribution
0 People Helped

I have a score of 758. My credit card utilization is 0% even though I not only use 1 of my 5 credit cards but it has had a revolving balance on it since November 2010 of about $830 which obviously decreases each month due to my monthly payments, but how is it possible that my utilization is still 0%?

1 Contribution
0 People Helped

I have had three credit cards reduce my credit limit (which they had increased in the past) down to what I owe. Now these cards are maxed out instead of being in the 39% - 50% range. I know this will greatly affect my credit score in the near future. I pay on time but unable to pay these cards off quickly. What should I do to protect and improve my credit situation as I move forward?

2 Contributions
0 People Helped

When I open up a new credit card or loan, is the CC Utilization percentage that is seen based solely on the current utilization (or whatever amount has been recently posted according to my lenders) or do they see the utilization over a period of time or possibly an average amount?

Results 71-80 of 239Results per page: 5 | 10 | 25Page 8 of 24   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW

Comment on this Article

Write your comment:
Enter Your Comments