Credit Utilization Ratio

Credit utilization divides your revolving balances by your total credit limits. Owing $2,000 against $10,000 of limits is 20% utilization. Only revolving accounts count; a mortgage or car loan is installment debt and sits outside the calculation entirely.

It carries roughly 30% of a FICO score, second only to payment history, and it is by far the fastest lever available. Unlike the length of your credit history, which only time can fix, utilization is recalculated every time your issuer reports a balance.

Below 30% is the usual rule of thumb, and below 10% is where the highest scores tend to sit. Both an overall figure and a per-card figure matter — a single maxed card can drag a score down even when your total utilization looks comfortable.

The most common surprise is that paying in full every month does not guarantee low reported utilization. Issuers typically report the statement balance, so someone who charges heavily and pays on time can still show high usage. Paying down before the statement closes, rather than before the due date, is what actually moves the number.

Raising limits or keeping old cards open lowers the ratio by enlarging the denominator, which is why closing an unused card can push a score down even though nothing about your spending changed.