JagInsights › Glossary › Credit utilization
What is credit utilization?
Credit utilization is the share of your card limits you are using. Why 90 percent used is a different score story than 20 percent.
Credit utilization is the percentage of your revolving credit limits that you are currently using. A $900 balance on a card with a $1,000 limit is 90 percent utilization.
Worked example
Three cards, limits $1,000, $2,000, and $2,000. Balances $900, $400, and $0. Total used is $1,300 of $5,000, which is 26 percent overall. The first card alone is at 90 percent. Scoring models look at both the overall share and a single card that is nearly maxed.
Why it matters
Utilization is one of the faster parts of a credit score to change, because it is a snapshot of the last reported balances, not a seven-year history.
Questions people ask
What percentage should I aim for?
Under 30 percent is a common ceiling people quote. Lower is generally better. There is no magic number that adds a fixed number of points.
Does paying before the statement help?
The balance your issuer reports is what the score sees. Paying the card down before that report can lower the utilization that gets recorded.
If I close a card, what happens?
You lose that card's limit. The same balances then sit on a smaller total limit, so utilization goes up.
Educational information only. JagInsights is not a financial adviser, broker, or lender. See the Terms and Privacy Policy.