Image source: Getty Images
If you’re looking to up your credit score, you probably already know that a clean payment history is a major key. It’s not the only thing that matters, though.
One other thing to keep in mind: How much you’re actually using your credit card, aka your “credit utilization ratio.”
Here’s how much you should actually spend on your card each month (hint: it’s not $0), and what else to know about your credit utilization ratio.
What is your credit utilization ratio?
Basically, your credit utilization ratio is the percentage of your available credit that you’re actually using each month. Here’s the simple formula:
Card balance ÷ credit limit = credit utilization ratio.
For example, let’s say you collect a $500 balance on a card with a $2,000 limit — that’s a credit utilization of 25%.
Scoring models like FICO treat this as a pretty big deal. It falls under “amounts owed,” which makes up about 30% of your credit score — second only to payment history.
How much should you actually use?
Generally, a good rule of thumb is:
- Under 30%: Good
- Under 10%: Excellent
- 1%-9%: Best for maximizing your score
If you’re regularly using more than 30% of your available credit, it can hurt (or at least not help) your score. From a lender’s perspective, it makes sense — even if you’re paying in full and on-time, lenders like to see that you aren’t running up a tab willy-nilly.
Looking to increase your overall credit limit without paying an arm and a leg? Check out our list of the best no-annual-fee credit cards available today to start saving.
Is 0% utilization actually best?
Not really — here’s where it gets tricky.
Credit scoring models like FICO and VantageScore generally like to see some recent activity. If all your cards report a $0 balance, it signals you’re not actively using credit. That’s why experts suggest letting a small balance, usually 1%-9%, report on at least one card.
Here’s the important part: This does not mean carrying debt on a card. You should always look to pay your balance in full and on-time.
Instead, it means using a tiny percentage of your available credit, letting it get reported to your statement balance, then paying it all off before the actual due date.
When your balance gets reported
The timing here is trickier than most people think.
Most issuers report your balance to the credit bureaus when your statement closes. That means your statement balance is what usually gets reported — not whether you pay it off later.
Example:
- You spend $1,000 on a $2,000 limit (50%)
- Your statement closes → 50% gets reported
- You pay it off the next day → your score already reflected 50%
That’s why paying your balance before your statement closes can help keep your utilization low.
Easy ways to lower your utilization
The good news is it’s usually not worth breaking out a calculator and sweating out your utilization month by month. Just know that generally speaking, smaller, more frequent payments are better than one big payment each month.
Here are all the easy ways to keep your utilization down:
- Make multiple small payments each month
- Pay your balance early, before the statement closes
- Ask for a credit limit increase on your most-used cards
- Spread your spending across multiple cards
Again, you don’t need to track this stuff closely every month. But it might matter more if you’re applying for a mortgage, loan, or new card, or if you’re close to reaching a higher credit score tier.
Want an easy way to lower your credit utilization? See our list of the best high-limit cards available today and level up your total available credit.
Alert: highest cash back card we’ve seen now has 0% intro APR into 2027
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
