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Experts generally recommend maintaining a credit utilization rate below 30%, with some suggesting that you should aim for a single-digit utilization rate (under 10%) to get the best credit score.
But while this is a good guideline, it's helpful to put the "rule of thumb" into context with how much credit people are really using.
Below, Select shares how much credit the average person uses and why your credit utilization rate matters.
Credit utilization is at its lowest since 2009
Select asked representatives of twocredit bureaus,Equifax and TransUnion, for the data they had on average credit utilization rates.
According to an Equifax spokesperson, the average credit utilization as of June 15, 2020, is 19.2% — a historical low since Equifax began tracking the data in 2009.
Putting this into context is important: We're in the midst of a recession and global public health crisis. As millions of Americans are financially strained and banks have cut back on lending, it makes sense that people would be using less credit than ever in efforts to prevent going into debt.
Generally speaking, however, outside of the pandemic, Equifax leveraged data from Equifax Credit Trends intelligence tool to find that credit card utilization has remained between 20% and 22% of total credit limits since the spring of 2011, with seasonal variation. TransUnion had similar findings, reporting that the average credit utilization rate in Q1 2020 was 20.4%.
Here's why your credit utilization rate matters
Your credit utilization rate, also known as your debt-to-credit ratio, is an important factor that helps determine your credit score.
Shown as a percentage, it represents how much credit you use (your credit card balance) compared to how much you have available to you (your credit limit).
So, if you have an $800 credit card balance on your Chase Freedom® and you have a $2,000 credit card limit, your credit utilization rate is 40%:
($800 / $2,000 = 0.4 X 100 = 40%)
Your utilization rate matters because it makes up 30% of your FICO credit score. A good credit score can go a long way in helping you qualify for the best credit cards, such as the Blue Cash Preferred® Card from American Express for grocery rewards and the *Capital One Savor Cash Rewards Credit Card for entertainment rewards.
Before approving your credit application, lenders and creditors also look at your utilization rate to determine how much of a risk you are. A high utilization indicates that you could be a subprime borrower who may have trouble paying back a loan or credit card bill because you already have a lot of debt, whereas a low utilization rate illustrates you're able to manage credit responsibly.
Bottom line
No matter where your credit utilization rate stacks up against the average, know that the magic to a healthy utilization ratio is maintaining a low credit card balance and a high credit limit. The closer you can get to having a single-digit utilization, the better. Prioritize paying down your balances and once you've made a dent in your debt, you could considerasking for a credit limit increase.
*Information about the Capital One Savor Cash Rewards Credit Cardhas been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
Credit utilization is at its lowest since 2009
What is the average credit utilization rate? ›
What Is a Good Credit Utilization Rate?
| Average Credit Utilization by Credit Range | |
|---|
| FICO® Score Credit Range | Average Credit Utilization Ratio |
|---|
| 670-739 (Good) | 35.2% |
| 740-799 (Very good) | 14.7% |
| 800-850 (Exceptional) | 6.5% |
2 more rowsNov 5, 2023
Lenders typically prefer that you use no more than 30% of the total revolving credit available to you. Carrying more debt may suggest that you have trouble repaying what you borrow and could negatively impact your credit scores.
What is the credit usage rate of someone who is using 2000 of their 10000 credit limit? ›
Typically expressed as a percentage, your credit utilization ratio looks at your current debt in relation to your total available credit. This shows lenders how much credit you're actually using. For example, a $2,000 balance on a single credit card with a $10,000 limit equals a credit utilization ratio of 20%.
Is using 30 percent credit utilization? ›
To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.
How do you calculate average credit utilization? ›
Take the total balances, divide them by the total credit limit, and then multiply by 100 to find your credit utilization ratio as a percentage amount.
How to find utilization rate? ›
You can calculate the utilization rate by dividing billable hours worked by the number of hours worked in a day. Realization rate: This measures the potential value of work performed. You can determine your law firm's realization rate by dividing the number of billable hours invoiced by the number of hours worked.
How much is 30 of 2000 credit limit? ›
What is a good credit utilization ratio? The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio below 30%. So, if your only line of credit is a credit card with a $2,000 limit, that would mean keeping your balance below $600.
How much should I spend if my credit limit is $1500? ›
You should use less than 30% of a $1,500 credit card limit each month in order to avoid damage to your credit score. Having a balance of $450 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.
What is 30 percent of $1000 credit limit? ›
Keeping your credit utilization at no more than 30% can help protect your credit. If your credit card has a $1,000 limit, that means you'll want to have a maximum balance of $300.
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
Is 100 credit utilization bad? ›
The use of trended data means that paying off credit card debt all at once, whether through a loan or a windfall, is unlikely to keep a history of high balances from affecting your credit score. Most credit experts suggest keeping credit utilization under 30%.
Will 50 credit utilization hurt me? ›
Using a large portion of your available credit can cause your utilization rate to spike. A utilization rate above 50% caused my credit score to drop 25 points. Paying the balance in full reversed the damage completely.
Is 10% credit utilization better than 30%? ›
A general rule of thumb is to keep your credit utilization ratio below 30%. And if you really want to be an overachiever, aim for 10%. According to Experian, people who keep their credit utilization under 10% for each of their cards also tend to have exceptional credit scores (a FICO® Score☉ of 800 or higher).
What is the credit card utilization for an 800 credit score? ›
Generally, you want your credit utilization ratio to be 30% or less. For those with credit scores of 800 or higher, their average utilization ratio is 6.1%.
Will 20% utilization hurt credit? ›
If you are trying to build good credit or work your way up to excellent credit, you're going to want to keep your credit utilization ratio as low as possible. Most credit experts advise keeping your credit utilization below 30 percent, especially if you want to maintain a good credit score.
Is a credit utilization of 70% good? ›
Many credit experts say you should keep your credit utilization ratio — the percentage of your total credit that you use — below 30% to maintain a good or excellent credit score. Credit utilization is a major factor in your credit scores, so it pays to keep an eye on it.
