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Posted 13 April 2023

Tips on Optimizing Credit Card Utilization

Credit card utilization can impact up to 30% of your credit score making it one of the most significant factors in the calculation, so it’s important to understand what it is and how to use it to increase your score. Utilization refers to how much of your available credit you use from cycle to cycle. For example, for a credit card with a $1,000 limit, if you make $450 in purchases in a month, it would be considered 45% utilization.

In general, it’s good to try to keep your utilization at 30% or lower. There’s no stated number, but this is considered to be a target that will have a positive impact on your score. If you do exceed this amount, it’s good to try to pay the balance off quickly and avoid waiting until the due date if possible. It’s also a good idea to avoid 0% utilization, as this can cause you to be “credit invisible” after an extended period. Keeping your credit card usage in the general window can have a great effect on your score.

How to Reach Ideal Utilization

There are two ways to reach an ideal utilization: increase your credit limit or spend less. If you make big purchases on credit for the convenience of swiping a card, pay the balance of the purchase as soon as possible afterward. Another key strategy is to ask for credit increases when you have a good chance of getting them. Asking your financial institution for a limit increase is usually as simple as making a call or filling out a form and answering some simple questions. The institution will look at your history and spending and determine whether they have confidence that you can handle an increase.

The best times to ask for an increase are when you have good credit and a good payment history, when you get a raise, or when your spending habits change. If you have new bills to pay and you figure you will go over 30% usage consistently, you might want to get your available credit increased. Another avenue if your available balance is getting too high at one institution is to apply for another card, and the combined available limits will make for a new, higher limit that will cause your spending to be a smaller portion of your combined available balances.

Keeping an eye on credit utilization is one of the best ways to increase your score and get better rates down the line. 


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