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Experts generally recommend maintaining a credit utilization rate below 30%, with some suggesting that you should aim for a single-digit utilization rate (under 10%) to get the best credit score.
But while this is a good guideline, it's helpful to put the "rule of thumb" into context with how much credit people are really using.
Below, Select shares how much credit the average person uses and why your credit utilization rate matters.
Credit utilization is at its lowest since 2009
Select asked representatives of twocredit bureaus,Equifax and TransUnion, for the data they had on average credit utilization rates.
According to an Equifax spokesperson, the average credit utilization as of June 15, 2020, is 19.2% — a historical low since Equifax began tracking the data in 2009.
Putting this into context is important: We're in the midst of a recession and global public health crisis. As millions of Americans are financially strained and banks have cut back on lending, it makes sense that people would be using less credit than ever in efforts to prevent going into debt.
Generally speaking, however, outside of the pandemic, Equifax leveraged data from Equifax Credit Trends intelligence tool to find that credit card utilization has remained between 20% and 22% of total credit limits since the spring of 2011, with seasonal variation. TransUnion had similar findings, reporting that the average credit utilization rate in Q1 2020 was 20.4%.
Here's why your credit utilization rate matters
Your credit utilization rate, also known as your debt-to-credit ratio, is an important factor that helps determine your credit score.
Shown as a percentage, it represents how much credit you use (your credit card balance) compared to how much you have available to you (your credit limit).
So, if you have an $800 credit card balance on your Chase Freedom® and you have a $2,000 credit card limit, your credit utilization rate is 40%:
($800 / $2,000 = 0.4 X 100 = 40%)
Your utilization rate matters because it makes up 30% of your FICO credit score. A good credit score can go a long way in helping you qualify for the best credit cards, such as the Blue Cash Preferred® Card from American Express for grocery rewards and the *Capital One Savor Cash Rewards Credit Card for entertainment rewards.
Before approving your credit application, lenders and creditors also look at your utilization rate to determine how much of a risk you are. A high utilization indicates that you could be a subprime borrower who may have trouble paying back a loan or credit card bill because you already have a lot of debt, whereas a low utilization rate illustrates you're able to manage credit responsibly.
Bottom line
No matter where your credit utilization rate stacks up against the average, know that the magic to a healthy utilization ratio is maintaining a low credit card balance and a high credit limit. The closer you can get to having a single-digit utilization, the better. Prioritize paying down your balances and once you've made a dent in your debt, you could considerasking for a credit limit increase.
*Information about the Capital One Savor Cash Rewards Credit Cardhas been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
All you need to do to determine each your credit utilization ratio for an individual card is divide your balance by your credit limit. To figure out your overall utilization ratio, add up all of your revolving credit account balances and divide the total by the sum of your credit limits.
What is a low credit utilization rate? ›
To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.
What is the average credit usage? ›
What Is a Good Credit Utilization Rate?
| Average Credit Utilization by Credit Range | |
|---|
| FICO® Score Credit Range | Average Credit Utilization Ratio |
|---|
| 300-579 (Poor) | 82.1% |
| 580-669 (Fair) | 56.1% |
| 670-739 (Good) | 35.2% |
2 more rowsNov 5, 2023
Credit utilization is a term used to describe how much debt you owe versus the line of credit available to you. This ratio is calculated by taking all the revolving debt (credit card debt) you currently owe and dividing it by the total amount of revolving credit (credit card limit) you have at your disposal.
How do you calculate average utilization? ›
Total Billable Hours / Total Hours Available
To calculate your utilization rate of the wider firm, all you need to do is divide the total of all employee utilization rates by the total number of employees. The utilization rate can also be calculated for each resource you own on a weekly, monthly, and yearly basis.
Is a 3% credit utilization good? ›
Most credit experts advise keeping your credit utilization below 30 percent, especially if you want to maintain a good credit score. This means if you have $10,000 in available credit, your outstanding balances should not exceed $3,000.
Does 0 utilization hurt credit score? ›
Maintaining a 0% utilization rate on all your credit card accounts can help your credit scores, but you can achieve excellent scores without doing so. A low utilization rate, preferably under 10%, is ideal.
How much credit does the average person have available? ›
Average American credit limit by credit score and age group
| Generation | Average Overall Credit Limit Per Person | Average FICO Score |
|---|
| Millennials (23-38) | $20,647 | 668 |
| Generation X (39-54) | $33,357 | 688 |
| Baby Boomers (55-73) | $39,919 | 731 |
| Silent Generation (74+) | $32,338 | 756 |
1 more rowDec 22, 2022
The question is: How many credit cards should you have? In reality, there's no right answer to this question. According to an Experian consumer credit review, Americans have an average of 3.84 credit cards per person. While that may seem like too many for some, others may consider it not enough.
Does cancelling a credit card hurt your credit? ›
Your score is based on the average age of all your accounts, so closing the one that's been open the longest could lower your score the most. Closing a new account will have less of an impact.
A general rule of thumb is to keep your credit utilization ratio below 30%. And if you really want to be an overachiever, aim for 10%. According to Experian, people who keep their credit utilization under 10% for each of their cards also tend to have exceptional credit scores (a FICO® Score☉ of 800 or higher).
What credit card has $5000 limit with bad credit? ›
The U.S. Bank Altitude Go Visa Secured Card is the best option if you have limited/poor credit and are looking for a high credit limit. You can deposit anywhere from $300 to $5,000, making your maximum credit limit available $5,000.
What is the formula for utilization rate? ›
You can determine utilization rate by dividing a team member's total number of billed hours by the total hours they have available. For example: If a team member bills 34 hours in one week to clients and they have 40 hours available in the week, then their utilization rate is . 85, or 85%.
How do you calculate average credit quality? ›
The weighted-average credit rating is calculated by considering the proportion of the value of each individual credit rating and noting it as a percentage of the entire portfolio thereby producing the average credit rating.
How do you calculate average credit balance? ›
What Is Average Daily Balance? The average daily balance on your credit card is the card's balance at the end of each day divided by the number of days in the billing cycle, which may be 28 to 31 days depending on the month. To determine your daily balance, you can add up: The card's balance at the start of the day.
What is the ideal credit Utilisation percentage? ›
Obviously, it's best to keep your credit utilisation ratio as low as possible. To keep it at a 'good' level though, you should be trying to keep it under 30%. If you're going over 50%, this would be considered a high credit utilisation ratio, and would likely be marked on your credit file.
