How Much of My Credit Limit Should I Use?


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Experts generally recommend keeping a credit usage rate below 30%, with some suggesting that you should aim for a single-digit usage rate (below 10%) to get the best credit score.

But while this is a good guideline, it helps to put the “rule of thumb” in context with how much credit people actually use.

Below, Select shares how much credit an average person uses and how important your credit utilization rate is.

Credit usage is at its lowest since 2009

Select the requested representatives of two credit bureaus, Equifax and TransUnion, for data they had on average credit utilization rates.

According to an Equifax spokesperson, average credit usage as of June 15, 2020 is 19.2%, a historic low since Equifax began tracking data in 2009.

It’s important to put this in context: we are in the midst of a recession and a global public health crisis. As millions of Americans struggle financially and banks have cut back on their loans, it makes sense that people are using less credit than ever before to avoid going into debt.

Overall, however, outside of the pandemic, Equifax leveraged data from Equifax Credit Trends survey tool to find that credit card use has remained between 20% and 22% of total credit limits since spring 2011, with seasonal variations. TransUnion obtained similar results, indicating that the average credit utilization rate in the first quarter of 2020 was 20.4%.

Here’s why your credit utilization rate matters

Your credit utilization rate, also known as the debt-to-credit ratio, is an important factor that helps determine your credit score.

Presented as a percentage, it represents the amount of credit you are using (your your credit card balance) over the amount you have available (your credit limit).

So, if you have a credit card balance of $ 800 on your Chase Freedom® and you have a credit card limit of $ 2,000, your credit utilization rate is 40%:

($ 800 / $ 2,000 = 0.4 X 100 = 40%)

Your utilization rate is important because it represents 30% of your FICO credit score. A good credit score can go a long way in helping you qualify for the best credit cards, such as American Express Blue Cash Preferred® Card for grocery rewards and Capital One® Savour® Cash Rewards credit card for entertainment rewards.

Before approving your credit application, lenders and creditors also review your utilization rate to determine your level of risk. High utilization indicates that you might be a risky borrower who may have difficulty paying off a loan or credit card bill because you already have a lot of debt, while a low utilization rate illustrates that you are. able to manage credit responsibly.

At the end of the line

No matter where your credit usage rate is relative to the average, know that the magic of a healthy usage rate is in keeping your credit card balance low and a credit limit low. high. The closer you get to single digit usage, the better. Prioritize paying off your balances and once you’ve reduced your debt you might consider request an increase in the credit limit.

Capital One® Savor® Cash Rewards credit card information was independently collected by Select and was not reviewed or provided by the card issuer prior to posting.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.


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