What is a Credit Utilization Rate?

Credit utilization is the percentage of your available credit you're using at any given time. It’s a key factor in determining your credit score, often accounting for up to 30% of your FICO score.

Why it Matters
Lenders view a low credit utilization rate as a sign of responsible credit use. Keeping your rate below 30% of your total credit limit is good practice, but aiming for 10% or less can significantly boost your score.

Quick Example
If your credit card limit is $10,000 and your balance is $2,500, your utilization rate is 25%. Paying down your balance to $1,000 reduces the rate to 10%, which is ideal.

 

Pro Tip

Your credit utilization rate is calculated per card and across all accounts, so check both!

Strategy of the Week – Timing Your Payments

To lower your utilization rate (and boost your score), make payments before your statement closing date, not just your due date.

Why it Works

Credit bureaus see the balance reported on your statement, not what you owe after paying the bill. By reducing your balance early, you appear to use less credit, improving your score.

Action Step

1. Find your credit card’s statement closing date (usually a few days after your billing cycle ends).
2. Schedule an extra payment right before this date to lower the reported balance.

Reflect on Your Spending Habits

This week, ask yourself...

• What’s my biggest credit card expense?
• Is it something I need or want?
• How can I reduce or eliminate unnecessary costs?

Being mindful of your spending is the first step to freeing up more money for timely payments and building a strong credit profile.

Challenge

For one week, track every purchase. At the end, identify one category to cut back on and redirect that money toward debt repayment.

Keep Your Credit Journey on Track

Credit Karma (sign up for free)
Get free credit reports and personalized tips for improving your score.

Pro Tip

Use these tools consistently to spot trends and stay on top of your financial goals.