Credit Utilization Ratio - How to Calculate & Reduce (2024)

FAQs

Credit Utilization Ratio - How to Calculate & Reduce? ›

Add up the credit limits on all your revolving credit accounts (your total revolving credit). Divide your total debt by your total credit limit. Multiply the remainder by 100 to arrive at your credit utilization ratio percentage.

Add up the credit limits of all your revolving credit accounts. Divide your total revolving credit balance (from Step 1) by your total credit limit (from Step 2). Multiply that number (from Step 3) by 100 to see your credit utilization as a percentage.

This means you should take care not to spend more than 30% of your available credit at any given time. For instance, let's say you had a $5,000 monthly credit limit on your credit card. According to the 30% rule, you'd want to be sure you didn't spend more than $1,500 per month, or 30%.

First, add up all the outstanding balances, then add up the credit limits. Take the total balances, divide them by the total credit limit, and then multiply by 100 to find your credit utilization ratio as a percentage amount.

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%.

The Takeaway

The 15/3 credit card payment rule is a strategy that involves making two payments each month to your credit card company. You make one payment 15 days before your statement is due and another payment three days before the due date.

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.

The less of your available credit you use, the better it is for your credit score (assuming you are also paying on time). Most experts recommend using no more than 30% of available credit on any card. Our calculator shows you where you stand.

Improving your credit in 30 days is possible. Ways to do so include paying off credit card debt, becoming an authorized user, paying your bills on time and disputing inaccurate credit report information.

What makes credit utilization go up? ›

In general, closing a credit card lowers your available credit, increasing your credit utilization ratio. On the other hand, opening a new account has the opposite effect. Tayne says if your credit cards don't have balances, closing one or more won't impact your current credit utilization ratio.

The date your balance is reported to the credit bureaus is often different from the payment due date. So if you were to max out your card mid-month, your credit utilization could appear dangerously high, even if you paid off that balance a week later.

It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.

The use of trended data means that paying off credit card debt all at once, whether through a loan or a windfall, is unlikely to keep a history of high balances from affecting your credit score. Most credit experts suggest keeping credit utilization under 30%.

Calculating the utilization rate consists of dividing an employee's total billable hours by the total available hours. In order to express the rate in percentage form, the resulting figure should be multiplied by 100.

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%.

You should use less than 30% of a $1,500 credit card limit each month in order to avoid damage to your credit score. Having a balance of $450 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.

Keep your credit card utilisation rate below 30%. This is the recommended percentage by credit suppliers. The percentage in question is based on all of your credit cards combined.