Credit Utilization Rate Calculator
Utilization Rate:
0%
Available Credit:
$0.00
What is Credit Utilization Rate?
Credit utilization rate, often referred to as your credit utilization ratio, is a pivotal metric used by credit scoring models like FICO and VantageScore to determine your creditworthiness. It represents the percentage of your total available credit that you are currently using. In simpler terms, it answers the question: "Of all the credit limits extended to me, how much have I spent?"
This ratio is the second most important factor in calculating your credit score, accounting for approximately 30% of your FICO score calculation. Keeping this number low generally signals to lenders that you manage debt responsibly and are not overextended financially.
How is Credit Utilization Calculated?
The math behind credit utilization is straightforward. It is calculated by dividing your total revolving credit balance by your total revolving credit limit, and then multiplying the result by 100 to get a percentage.
Utilization Rate = (Total Credit Card Balances ÷ Total Credit Limits) × 100
Example Calculation
Imagine you have two credit cards:
- Card A: Balance of $500, Limit of $2,000
- Card B: Balance of $1,000, Limit of $3,000
To calculate your aggregate utilization:
- Total Balance: $500 + $1,000 = $1,500
- Total Limit: $2,000 + $3,000 = $5,000
- Calculation: ($1,500 ÷ $5,000) × 100 = 30%
Per-Card vs. Total Utilization
It is important to note that credit scoring models look at utilization in two ways:
- Aggregate Utilization: The total of all balances divided by the total of all limits (as calculated above).
- Per-Card Utilization: The balance of a specific card divided by that specific card's limit. Maxing out a single card can hurt your score even if your total utilization is low.
What is a Good Utilization Rate?
The general rule of thumb in the financial industry is to keep your credit utilization below 30%. However, for the best possible impact on your credit score, many experts recommend keeping it below 10%.
- 0% – 10% (Excellent): Indicates exceptional credit management.
- 10% – 30% (Good): Generally viewed favorably by lenders.
- 30% – 50% (Fair/Warning): May start to negatively impact your score.
- Over 50% (Poor): Considered high risk; likely to significantly lower your credit score.
How to Improve Your Utilization Rate
If your calculator result shows a high percentage, consider these strategies:
- Pay Down Balances: Making extra payments before your statement closing date can reduce the balance reported to bureaus.
- Request a Limit Increase: Asking your issuer to increase your credit limit (without increasing your spending) will mathematically lower your utilization rate.
- Open a New Card: While this adds a hard inquiry, it increases your total available credit limit, which can help lower the overall ratio.