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What is Your Credit Utilization Ratio?

6 min read

Last Updated: February 24, 2026

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Key Takeaways

Your credit utilization ratio is the amount of available credit you’re using.
Calculate your credit card utilization by dividing the total of your balances by the total of your revolving credit.
When your credit utilization is high it might signal you’re having trouble paying your balances and may lower your credit score.

Your credit utilization ratio (also known as a credit utilization rate) represents the percentage of your total available credit you’re using. Only revolving credit accounts, such as credit cards or personal lines of credit, apply to your utilization ratio.

You may manage your credit utilization by calculating your ratio and keeping it low. This could improve your credit score and open you to more credit opportunities.

How do you calculate your credit utilization ratio?

Remember, when it comes to your credit score, your credit utilization ratio only involves your revolving credit accounts.

You may follow these steps to determine your credit utilization ratio:

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

Can a high credit utilization ratio hurt your credit score?

Credit utilization is one of the factors that may significantly impact credit scores. Using a large portion of your available credit may lower your score because it signals you might be over extended and at risk of not being able to make your payments. A low credit utilization rate points to better borrowing habits.

So how does it factor in your credit score? Credit bureaus use credit scoring models (or mathematical algorithms) to arrive at your credit score. They base the calculation on the information in your credit report (a record of your borrowing and repayment activity).

Credit utilization typically accounts for 30% of your credit score, depending on which credit scoring model is used. So, the amount you owe when lenders report your credit information to the credit bureaus may affect your score.

Lenders usually report your account balances to credit bureaus at the end of your billing cycle, about every 30 to 45 days. That means a credit bureau can’t see your daily credit card balances; they only know the amount you owe on your monthly billing statements, which is the amount reflected on your credit report and score as amounts owed.

Say you make a large purchase on one of your credit cards and don’t make a payment towards it before the credit card company issues your monthly statement. In that case, the credit utilization on your credit report will reflect the large purchase. This may increase your utilization and potentially lower your credit score. However, your credit score should bounce back once you pay off the balance.

Did you know?

A mobile banking app may help you manage your credit card account. Among other features, the Discover^® mobile app lets you check your current balance, make payments, and set spending alerts to help you maintain a low balance.

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What is a good credit utilization ratio?

We’ve established that it’s best to have a low credit utilization ratio, but how low is low enough? Experts like the Office of Financial Readiness suggest a credit utilization ratio of 1-10%.

But you may not want to go too low; a 0% credit ratio may help your credit score if you’re actively using your card, but a 0% ratio from inactive credit use may not. Part of building a good credit history is showing you can borrow and repay your debt. That means using your credit and managing it responsibly.

How can you improve your credit utilization ratio?

If your credit utilization ratio is hurting your credit score, there are steps you may take to help lower it. Take note of these options:

Pay down debt: Paying your debt is one of the best ways to lower your credit utilization ratio. But because your lenders report your balances at the end of your billing cycle, the timing of your payments may impact how quickly you see improvement to your credit score. Consider making payments to your balances before the close of your billing cycle. And if you make payments after receiving your statements, try to pay more than the minimum required. Once you pay down your debt, you’ll need to maintain low balances to sustain your ratio.
Monitor spending: Keeping tabs on how much you’re charging may go a long way in helping you lower your credit utilization. If your credit card company has a mobile app, you may be able to set spending alerts that notify you when you’ve reached a certain credit card balance. And managing your spending may help you manage payments, too.
Request a higher credit limit: Increasing your total available credit may help lower your utilization ratio. So it may help to request a credit limit increase from your credit card issuer. They’ll look at your:
- Monthly income and expenses
- Length of credit history
- Payment history
- Current credit utilization percentage

However, your request might not get approved, and a credit limit increase only works if you keep your balance proportionately low.

Open a new revolving credit account: Another way to increase your available credit is by opening a new credit card or personal line of credit. But you’ll still need to keep your balances low to manage your debt compared to your total available credit. And while opening a new account may increase your total credit, applying for too many new accounts within a short time may hurt your credit score.
Make a balance transfer: You may raise your total credit limit by moving your debt to a new card. If you move high-interest balances to a single card, you may free up the available credit on your other accounts (as long as you don’t close them). It will also provide a new line of credit. Additionally, some new credit cards offer a low to 0% introductory interest rate on balance transfers, which may help you pay your debt more quickly by avoiding costly interest charges.
Monitor your credit report: The Federal Trade Commission (FTC) reports that consumers can now request one free credit report per week.

You can request your free credit report at AnnualCreditReport.com (the only website authorized by the federal government). Additionally, you may ask for a free credit report within 60 days of being denied credit.

The bottom line

Credit utilization ratio is one of the major component for calculating credit scores. Understanding how credit utilization works, including how to calculate your rate, may help you manage your score and inform better financial decisions moving forward.

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