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Credit Card Utilization: Everything You Need To Know

December 21, 2017 · 3 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Credit Card Utilization: Everything You Need To Know

In order to fully understand credit card utilization, picture this: Imagine that you have four credit cards, each with a $5,000 limit. That means that you have access to $20,000 worth of credit total. Now, imagine you have a balance of $2,000 on Credit Card A from a trip to Panama, $1,000 on Credit Card B from when you had to unexpectedly replace all your tires, $2,000 on Credit Card C from last holiday season, and $1,000 on Credit Card D from your regular monthly bills.

In total, you owe $6,000. That means you are using $6,000 of the $20,000 in credit you’re entitled to. If we calculate that as a percentage (30%), we have your credit card utilization rate.

In this guide, we will look at calculating your credit card utilization rate, determining what percentage of available credit you should shoot for, and understanding how credit card utilization affects your credit score and overall financial wellness.

How do you calculate your credit card utilization rate?

Let’s start with the basics: How do you figure out your credit card utilization rate? In our example above, we determined that if you have $20,000 of credit available to you, and you owe $6,000, your credit utilization rate is 30%. How did we get there? Using pretty simple math. To figure out your credit card utilization rate, simply divide your total credit card balances by your total credit line, like this:

Total Credit Card Balance/Total Credit Line = Credit Card Utilization Rate

With the numbers from our example above, it looks like this:

6,000/20,000 = .3 or 30%

Simple, right? You’ve got this.

What counts as “good” credit card utilization?

As it turns out, just because you’ve been approved for a $10,000 credit card doesn’t mean it makes financial sense to charge $10,000 worth of rosé and seltzer to your credit card—even if you know you can pay it off over a couple of months. In fact, you might be shocked to learn how little of your available credit you’re supposed to use.

To maintain or boost your credit score, it is recommended the general rule is that you should not exceed a 30% credit card utilization rate. That means that in our example, you would not want to use more than $6,000 of your available $20,000 credit. Even though 30% might seem like a small percentage, keeping below that threshold can ensure that your credit score isn’t being dinged for over-utilization.

Is credit utilization affecting your credit
score? See a breakdown in the SoFi app.


How does credit card utilization affect your credit score?

The world of credit scores can make your head spin, but what we know for sure is that credit card utilization plays a big role in how companies compute your credit score. In fact, about 30% of your credit score is determined by your credit card utilization rate. That means a high credit card utilization rate can adversely affect your credit score.

How do you monitor your credit card utilization?

All of this might seem difficult to keep track of, but seeing as we live in the 21st century, it can actually be quite easy to set up account reminders that will alert you when you are approaching that 30% credit card utilization mark.

In addition to watching your credit card utilization rate, try to make payments on your credit cards on-time each month. Checking your credit score regularly will also help you keep your financial health in check.
(Though you don’t want to check your score too often, it’s good to keep tabs to make sure the reporting is accurate on your credit score.)

Overall, credit card utilization rates can be confusing, but now you’re prepared to better calculate your own credit card utilization rate and leverage that in pursuit of a great credit score.

Have high credit card utilization across multiple cards? consolidate credit card debt with a low interest personal loan and reduce your utilization rate, which can positively affect your credit score.


The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Many factors affect your credit scores and the interest rates you may receive. SoFi is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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