Why Does Credit Utilization Affect Your Credit Score?
Credit utilization accounts for roughly 30% of a FICO score, making it the second most important factor after payment history. High utilization signals to lenders that you may be financially stretched and are a higher-risk borrower. Scoring models evaluate both your overall utilization across all cards and the utilization on each individual card.
What Is the Ideal Credit Utilization Rate?
Most experts recommend keeping utilization below 30%, but those with the highest scores often keep it under 10%. There is no universally perfect number — lower is generally better. If you are preparing to apply for a major loan like a mortgage, paying down balances beforehand to reduce utilization can give your score a meaningful boost.
How Can You Lower Your Credit Utilization?
The most direct ways are to pay down your balances and to request credit limit increases from your card issuers. You can also make multiple payments per month to keep your balance low on your statement closing date, which is when most issuers report to the bureaus. Opening a new card increases your total limit but also triggers a hard inquiry.
Frequently asked questions
Does credit utilization reset each month?
Yes. Credit utilization is calculated from the balances reported on your statement closing date each month. It is not a running average — it reflects your current balances. Paying down debt before your statement closes is an effective short-term strategy to improve your score.
Does having a $0 balance hurt your credit?
Not significantly. Having very low or zero utilization is generally positive. However, if all of your accounts sit completely inactive for a long period, some issuers may close them, which can affect your available credit and potentially your score.