The Relationship Between Your Credit Score and Credit Card Utilization Rate

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% utilization. The average credit score of those who had a utilization rate of 0% 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.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

All Comments

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Why is my Mortgage showing up under my credit card utilization?

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Helpful to 1 out of 2 people

The credit rating agencies, Credit Card Companies and banks are into legalized embezzalment of the american people.

It is a big JOKE, and an unfair system! People with some back bone in Congress need to setup and fight this.

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I made substantial payments toward the balances of two of my credit cards two billing cycles ago, and the correct (and reduced) balances are showing on my Credit Karma report, but my credit Card Utilization score continues to be nearly 20% higher than it actually is. What gives?

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I have a vistoria secret credit card available balance is $350 and AMEx Card available balance $1000. Whenever i use my card I pay the balance off the same day or next day in full. My credit utilization score is a C. So i'm not understanding why. Do I not pay it off right away and just wait until a statement arrives and then pay it off? How quickly will my score go up if I do that?

Reply by
MelissaStops

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I was doing this as well, paying off the entire balance immediately and had a low utilization score too.  What I started doing was only paying the statement balance and always by the due date (usually a week before) and the credit utilization score went up as did my over all score.

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when you get a credit pull do they check your current (to date) balance as far as utilization or is it whatever the last reporting date shows?

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It looks to me as though most credit card companies report the statement balance a few days after the statement is produced.   I am also thinking that either they report to the credit reporting comapnies on different days, or possibly report almost immediately if you max out a credit card.  For me, it looks like Chase reported information to Transunion on 12/17 and to Equifax on 12/20.    

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Ok I got health credit type cards 10k limits. I have visa Credit cards 6k limits and so on. But one of my oldest credit cards from capital one is stuck at a 500 dollar limit. I have ask them for a increase over the years. Now giving swipe fee's and such. Bye not giving me a increase its costing them money. It is all so costing them because I keep my utilization around 10 percent when ever possible. I am reluctant to drop it because of its age. So how would a creditor see a 500 dollar credit card in a group of ones in the thousands. Is its low limit hurting me or helping me. I think its hurting

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I am confused why my credit card utilization is so out of date? My credit report says it was updated on 2/24, but the credit limit on one of my credit cards is that of 3 months ago... and none of my utilization numbers are correct. Why is this so out of date if it says it was updated 2 days ago?? I am confused

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What I get from all the posts is this:   Have lots of credit cards with high limits, BUT NEVER EVER EVER USE THEM FOR ANY REASON.  Yeah, it is a great country we live in.    So I ask,  why have high limits and lots of cards if you are penalized for using them?  Why not one card with a high limit for emergencies only?   And your score goes down if you close one of these high limit cards?  That is beyond ridiculous.  Now you can get in less trouble but you are penalized anyway.   My utilization is just under 70% and I get a D rating for that.   I am good enough to be approved for any card, but if I use them I am screwed.  SMDH

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my credit score was updated today, but the infomration is over a month old so i am confused... why isn't my info updated? Its saying my utilization is much higher than it is which is frustrating

Credit Karma Team
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Hi tuckerp,

Your creditors typically report to the bureaus just once per month. For this reason, the data can lag behind your current balances and utilization. 

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