The So-Called "Credit Utilization Ratio," and Advice About It

November 8, 2008

Bank of America's BankAmericard (now VISA) started it all with the idea of a national credit card. But did B of A envision millions maintaining balances from month to month at 20% interest? If that wasn't the original idea, that's what it became, anyway.

The notion that we're always in hock has stuck for almost everybody but stalwarts. Below is what the press think is a good number for the factor formally listed as Proportion of balances to credit limits on bank/national revolving or other revolving accounts too high, ranging from merely not "maxing out" your cards—to zero.

Perhaps you noticed: The media's hackneyed treatment of this issue is so broad that the name of the factor even changed from the "proportion of balances to credit limits on bank/national revolving or other revolving accounts too high" to just "credit utilization ratio." Who told them this stuff is anybody's guess. It would be funny if it wasn't so pathetic.

And so, presented at great risk, here is the story. Choose your own reality:

Credit.com - "Nobody knows what the perfect number is."

Washington Post - "CFA and WaMu offered some tips. Pay your bills on time. Don't max out your cards."

Consumer Federation of America and Washington Mutual (WAMU) - "While more than three-quarters (78%) correctly understand that making a monthly payment more than 30 days late lowers one's score, less than three-fifths (59%) know that maxing out a credit card by using the entire credit line also lowers scores."

Lending Tree Lendingtree [20190225, ed.] - "Don't max out, or get close to maxing out, the limits on your credit cards or revolving credit accounts."

CreditCards.com - "FICO views borrowers who habitually max out credit cards or who get very close to their limits as people who cannot handle debt responsibly." [and, "habitually," may have nothing to do with it because the FICO uses a "snapshot" of the credit file at the moment it is created, not a history of balances]

FDIC - "Don't max out or charge near the limit on your credit card."

State of Ohio - "Don't Max Out Your Accounts."

State of Washington - "It's not wise to max out your credit cards."

Wall Street Journal - "The basic steps to build and maintain a good credit score haven't changed: Pay your bills on time and don't max out your available credit."

Realty Times - "Don't max out your credit cards."

CNN/MONEY Magazine - "It can hurt to max out all your accounts or to barely use them."

Equifax - "However, a high debt to credit ratio on certain types of revolving (credit card) accounts and installment loans will typically have a negative impact."

consumerinfo.com (Experian) -

• Keep your debt reasonable. One rule of thumb: for a good credit score, your account balances should be below 75% of your available credit. For example, if you have a $2000 credit limit, you should have a balance of no more than $1500.
• Maintain only a reasonable amount of unused credit. While it's good to have a cushion of credit available, having ready access to thousands of dollars of debt makes you a poorer credit risk.

NBC TODAY - "Using more than two-thirds is a serious drain on your score."

Fair Isaac - "But as a general rule, you want to try to keep your utilization on any one card, and across all of your credit cards, below 50% to avoid the risk of hurting your FICO score."

NBC TODAY - "That ratio is best when it's about 40 to 50 percent."

Associated Press - "The Consumer Federation recommends credit card users keep their utilization rates below 50 percent, said Stephen Brobeck, executive director of the group."

Chicago Tribune - "And if you have credit card debt, you should try as hard as you can to pay it down (component No. 2). Otherwise, if your balance is too close to your credit limit (more than 50 percent of it), your score will suffer."

CNN - "There's no magic percentage. However, credit experts recommend you stay below 50 percent. And the lower you go, the better your score will be."

Businessweek - "Don't max out a credit card, and keep as much of your credit line as free as you can. Cardholders should never use more than 50% of their available credit, even when money is tight."

Washington Post - "Generally, you don't want to use more than 50 percent of the available balance on any one card, and you don't want the combined utilization to be more than 50 percent."

BankRate - "'Keep credit purchases under 50% of the credit limit. (If you have a) $5,000 limit -- and you want to buy a $4,000 furniture set -- split the purchase onto two cards,' says [Cate] Williams."

SmartMoney - "'If you can keep it below 50%, both individually and on all accounts, it should not impact your score negatively,' she [author and debt counselor Gerri Detweiler] says."

NBC TODAY - "That ratio is best when it's about 40 to 50 percent."

The Mortgage Reports Blog - "An ideal ratio is 35% or less."

ABC Good Morning America - "In terms of credit utilization, a utilization ratio of 35 percent or less is good."

CNN/Money - "If you carry a balance on your credit cards, Evan Hendricks, author of Credit Scores and Credit Reports, recommends keeping it to a third or less of each card's limit."

Author - "This means two things: carry a small balance and whatever you due, don't cancel credit accounts with zero balances unless your total 'amount owed' still equals somewhere around 1/3 of your available balance."

NBC TODAY - "Your score will be highest if you are using only about one-third."

Kiplinger - "You want to keep your 'credit utilization' ratio -- the percentage of your credit limit that you've actually used -- no higher than 30% of your available credit limit."

CNN - "Ideally, credit experts say, your never want your balance to exceed 30 percent of your credit limit."

AskMrCreditCard.com - "Do not charge more than 30% of the available balance on any of your credit cards. Banks like to see a nice record of on-time payments, and several credit cards that are not maxed-out. If you are carrying high balances on your credit cards, then make paying them down under 30% a priority."

MSN Money - "Getting your balances below 30% of the credit limit on each card can really help."

AP Los Angeles Business Writer Alex Veiga - "Credit experts say the single best way to improve one's credit score is to make payments on time and keep credit balances at 30 percent or below your total available credit."

Contra Costa Times - "Some consumer experts advise keeping a spending balance to no more than 30 percent."

Atlanta Journal Constitution - "Pay down your credit so that you don't owe more than 30 percent of the credit limit, and have a 'healthy' mix of credit."

Businessweek - "Try to spend only 30% of your credit limit."

BankRate: "And in the credit-scoring world, a 30 percent utilization rate is much better than a 60 percent one."

CreditCards.com - "To boost their credit score, a borrower should maintain low credit card balances, with experts recommending that the amount owed should not exceed 30 percent of the individual's credit limits."

AP - "And if you're not using much of your available credit anyway - Jody Farmer, vice president of CreditCards.com, said it's best to use less than 30 percent - you should be fine."

About.com - "Keep your credit card balances at about 30% of your credit limit or less."

WAVE TV, Louisville - "Lenders look at the balance-to-credit limit ratios, which should not be more than 30 percent."

New York State Senator Charles J. Fuschillo, Jr. - "Limit the use of each of your credit cards to 30% of the card's credit limit. Having too many maxed out cards could lower your score."

WikiAnswers - "Also, if you have a high limit but 30% or less balance owed, that is the strongest for FICO purposes."

CNNMoney - "But, experts recommend keeping your debt-to-limit ratio under 30%, or even under 10% if possible."

CNNMoney - "Experts suggest getting your credit card balance to less than 30% of your credit limit."

Mint.com - "Aim for a ratio that's less than 30%."

Bloomberg - "It should be less than 30 percent, said David BarMack, president of National Credit Education Plus in San Diego."

AP - "Experts say it is best to use less than 30 percent of your available credit."

Washington Post - "If you are using more than 30 percent of your available credit balance on any one card or on all of them together, you could see a significant drop in your credit score."

CNN - "Generally, it's good to keep your balances at or below 25 percent of your credit card limit, said Jeanne Kelly, founder of The Kelly Group in Brookfield, Conn., which helps clients improve their credit scores."

HowStuffWorks - "Reduce your balances on credit cards to 75 percent or less of your available credit (25 percent is preferable)."

Kiplinger - "[Fair Isaac's] Watts recommends keeping the balance on your cards below 25% of your available credit, or $2,500 on a card with a $10,000 ceiling."

Kiplinger - "You'll earn a much stronger credit score if you show restraint and keep your balances below 25% of your credit limit -- or $1,250 on a card with a $5,000 ceiling."

ORNL Federal Credit Union - "Keep your credit utilization ratio below 25%."

Central Coast Federal Credit Union - "Keep your credit utilization ratio below 25%."

whatsmyscore.org - "Keeping your credit balance to 25% or below your available credit is a good general rule." (from the "the facts" section)

Kiplinger - "You'll get the most points for your credit score by keeping your ratio below 10%, says [credit.com's Emily] Davidson. But keeping it below 20% can help, too... You won't get extra points for keeping it much less than 10%, however, and you always want to keep it above 0% to show that you can manage credit."

San Jose Mercury News - Fair Isaac's Barry Paperno: "If you're below 10 percent, whether total or in each of your accounts, that's the place to be. It's actually better to show small balances than zero balances, but I want to emphasize slightly. That does not mean you should carry a balance every month and pay finance charges."

Chicago Tribune - "[Credit.com's John] Ulzheimer said you should try to carry a balance that is no higher than 10 percent of the limit you are allowed."

USA Today - "He [John Ulzheimer] recommends reducing your individual and total balances to 10% of your available credit."

Chicago Tribune - "You have an 80 percent utilization ratio. Better is a ratio in the 30 percent range; best is less than 10 percent."

CNBC - "You know that nothing magical happens at 30% or 50% as some credit folks advise. 10% should continue to be your goal."

Contra Costa Times - "'You never want to spend more than 10 percent of your available credit limit,' she [an interviewee] said."

mint.edu/Motley Fool - "Before any major loan application process (mortgage, auto loan, etc.), get serious about paying down your debt. In this instance, usage of 10% or less is ideal."

CNN - "Ideally your purchases should be within 10% of your credit limit, said Ulzheimer."

CNNMoney - "But, experts recommend keeping your debt-to-limit ratio under 30%, or even under 10% if possible."

The Motley Fool - "Our advice is to keep your debt to below 10% of your limit -- and you are paying the bill off every month, right? If you can't handle that, keep in mind that around 30% is "acceptable" to the banking world, and that red flags start waving when your debt-to-available-credit ratio exceeds 50%."

Oprah - "'You want to get your revolving debt to no more than 10% of the credit limits on the cards you have,' Ulzheimer says."

Fair Isaac - "For FICO High Achievers the ratio of revolving balances to credit limits is 7%, on average."

Consumer Federation of America and Fair Isaac Corporation (a document stored on a government website) - "Keep balances low on credit cards."

Kiplinger - "You won't get extra points for keeping it much less than 10%, however, and you always want to keep it above 0% to show that you can manage credit."

CNBC - "It would help your score to spread your debt out across cards and limits so no more than 10% is used on any one card–but of course my best advice is to get rid of all that debt! To really bring up that score, don't just spread your debt around; get it as close to 0% on all cards as possible."

CreditCards.com - "'The lower that utilization number is, the better it is for your score,' says [Fair Isaac's Barry] Paperno."

MarketWatch - "Pay down your debt, pay all your credit accounts on time and keep open accounts with a $0 balance."

Consumer Federation / Fair Isaac - "The more you owe compared to your credit limit, the lower your score will be."

Suze Orman - "The FICO brain trust says there is no specific number that qualifies as a 'good' ratio, just that lower is always better."

AP - "The lower the percentage the better."

Bankrate - "Pay them off."