Quick answer
Credit utilization is your revolving balances divided by your credit limits. $1,500 owed on $5,000 of limits is 30%. It is part of the amounts owed factor, about 30% of a FICO score. The CFPB notes experts advise staying at or below 30%, and lower generally helps. Paying before the statement closes lowers the balance that gets reported.
Credit utilization is one of the few score factors you can change in a single billing cycle, which is why it matters so much when you are about to apply for a loan.
How to calculate it
Add up the balances on your credit cards and other revolving accounts, then divide by the total of their limits.
| Card | Balance | Limit |
|---|---|---|
| Card A | $1,000 | $2,000 |
| Card B | $500 | $3,000 |
| Total | $1,500 | $5,000 |
$1,500 divided by $5,000 is 30%. Try your own numbers in the credit utilization calculator.
Why it matters
myFICO says amounts owed make up about 30% of a FICO score, and that utilization on revolving accounts is an important part of it. Using a high share of your limits suggests you may be overextended. FICO scores also look at how many accounts carry balances.
What ratio to aim for
The CFPB says experts advise keeping your use of credit at no more than 30% of your total credit limit, and that you do not need to carry a balance to get a good score. myFICO notes a low ratio can sometimes help more than using no credit at all.
How to lower it
- Pay before the statement closes. Issuers typically report your statement balance, so an early payment lowers what the bureaus see.
- Pay down the highest-utilization cards first if you want the biggest visible change on individual cards.
- Keep old cards open. Closing a card removes its limit.
- Consolidate card balances into an installment loan. Moving revolving balances to a fixed loan lowers revolving utilization, but only helps if you do not run the cards back up. See debt consolidation loans.
- Ask for a higher limit if you can do so without a hard inquiry and will not spend more.
For a full payoff plan, read how to pay off credit card debt.
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Frequently asked questions about credit utilization ratio: what it is and how to lower it
What is a good credit utilization ratio?
Lower is generally better. The CFPB says experts advise keeping your use of credit at no more than 30% of your total credit limit.
Is 0% utilization best?
Not always. myFICO says that in some cases a low utilization ratio can have a more positive impact than not using any of your available credit at all.
Do installment loans count toward utilization?
Credit utilization usually refers to revolving accounts like credit cards. myFICO says FICO scores also consider how much of an installment loan is still owed compared with the original amount.
Why does my report show a balance when I pay in full?
Issuers typically report your statement balance. Paying before the statement closing date can lower the balance that shows up.
Will closing a card hurt my utilization?
It can. Closing a card removes its limit, so the same balances become a larger share of your remaining credit.
Sources
- myFICO: How owing money can impact your credit score (accessed 2026-10-09)
- CFPB: How do I get and keep a good credit score? (accessed 2026-10-09)
- myFICO: What's in my FICO Scores? (accessed 2026-10-09)
Last updated 2026-10-09. How we research and update pages.