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Why 30% utilization ratios might lower your credit score

Updated: Nov 24, 2023



When it comes to the question of how much of your credit card limit you should spend for a higher credit score, the common advice is to stay under 30%.


It's essential to look at the 30% threshold as a guideline, not a strict rule. Because in reality, using even less—much less—can have a more positive impact on your credit score.

Credit utilization makes up 30% of your credit score, emphasizing its significance in managing your finances wisely. Watching this ratio is crucial.

Credit utilization is calculated by dividing your current debt by your credit limit, usually represented as a percentage. For example, if you have a $300 balance on a card with a $1,000 limit, your credit utilization for that card is 30%.


My personal strategy is to maintain a credit utilization rate of 12% or less, ideally aiming for 5-8%.

Here's how I manage this: When I receive a new credit card, I call the number on the back & ask for two important dates - the due date & the statement date. I write these down.

My approach involves making sure that my credit card balance is at or below 12% before the statement date. Once that date passes, I reset the balance.

I advise against making a habit of paying only the minimum balance. Not only does it adversely impact your credit score, but it also leads to potential financial complications & ballooning credit card debt.


For people actively looking for larger lines of credit to invest, maintaining a low credit utilization rate is key. Paying down your balance a day or two before the statement date portrays responsible credit behavior when your spending is reported to the credit bureaus.


By staying aware of your credit utilization & strategically managing your balances, you can enhance your creditworthiness.



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