Credit utilization ratio: calculate it per card and overall

The formula, per card and overall

The CFPB says scoring models look at how much of your credit limit you are using. myFICO describes two versions: for each card, divide that card's balance by its limit; for the aggregate ratio, add up all the balances and all the limits, then divide. Experian adds that only revolving accounts such as credit cards are included, not installment loans like car loans or mortgages.

The two versions can tell different stories. Experian's example: two cards with $5,000 limits, one at $5,000 and one at $0, give 50% overall but 100% and 0% per card. A low overall number does not hide one maxed-out card.

Worked example: two cards

The numbers are invented. Card A has a $2,000 limit and a $1,500 statement balance. Card B has an $8,000 limit and a $500 statement balance. Card A is at $1,500 / $2,000 = 75%. Card B is at $500 / $8,000 = 6.25%. Overall, ($1,500 + $500) / ($2,000 + $8,000) = $2,000 / $10,000 = 20%.

Two changes show how sensitive the numbers are. If the owner pays $1,200 on Card A before its statement closes, Card A reports $300 (15%) and overall utilization falls to $800 / $10,000 = 8%. If instead the owner pays off and closes Card B, total limits drop to $2,000 and overall utilization becomes $1,500 / $2,000 = 75%, even though total debt fell.

Why the statement date matters more than the due date

Utilization is calculated from what the issuer reports, not from what you owe today. Experian says issuers generally report your balance at the end of each statement period. Equifax says there is no set day or frequency card companies must report, that creditors who report generally do so monthly, and that reporting is voluntary: some issuers report to all three bureaus, some to one or two, and some not at all.

So a person who charges $1,500 and pays it in full on the due date never pays interest, but the $1,500 statement balance may still be what the bureaus see. If you are about to apply for a mortgage or car loan and want a lower reported number, pay down the balance a few days before the statement closing date. Your statement or the issuer's app shows the closing date.

What the CFPB and scoring companies say

• CFPB: scoring models look at how much of your credit limit you are using, so keep balances low. Many experts recommend using less than 30% of your total credit limit, and consumers with the highest scores often use less than 10%.
• CFPB: you do not need to carry a balance to get a good score; paying in full helps get the best scores and keeps interest as low as possible.
• myFICO: amounts owed make up 30% of a FICO score, and utilization is one element of that category. FICO also cautions that 0% utilization can keep you from the maximum points for amounts owed.
• Experian: many scoring models use only the most recently reported balances and limits, so lowering utilization can help quickly, while newer models such as VantageScore 4.0 and FICO 10 T also consider trended data, such as utilization over time.
• CFPB: closing a card can raise utilization by reducing available credit, though closing can still make sense for a card with fees or poor terms.

A monthly utilization check

Use this before applying for credit or once a month if you are rebuilding. None of it requires paying interest.

• List each card's limit, current balance and statement closing date.
• Compute each card's ratio and the overall ratio.
• For any card well above the rest, schedule a payment a few days before that card's closing date.
• Before closing a no-fee card, recompute overall utilization without its limit.
• Pull your credit reports and check that each limit and balance matches your records; our dispute guide covers what to do if one is wrong.