A few questions:

  1. Is it better to use your card and pay off the bill completely every month? [I prefer building the credit score over paying interest]
  2. How is credit utiltization calculated? Is it average utilization over the month, or total amount owed/credit_limit per month?
  3. How does credit utilization affect your score? Is too much a bad thing? Is too little a bad thing?
  • 2
    credit utilization is a LARGE PERCENTAGE of your credit score. But your credit score doesn't guarantee you access to credit. Bank of America denied me a larger credit line without looking at my credit score, and I quote the underwriter "FICO scores are easily manipulated", mainly they wanted to see that I had carried a balance as large as I was asking to get granted, but credit score wasn't a metric.
    – CQM
    Jan 16, 2013 at 6:44

2 Answers 2



1 - yes, it's fine to pay in full and it helps your score.

2 - see chart above, it's calculated based on what the bill shows each month.

3 - answered by chart. 1-19% utilization is ideal. 0% is actually worse than 41-60%

Note: The above image was from Credit Karma. A slightly different image appears at the article The Relationship Between Your Credit Score and Credit Card Utilization Rate. I don't know how true this really is. Since writing this answer, I've seen offers of a true "FICO score" from multiple credit cards, and have tinkered with my utilization. I paid my active cards before the reporting date, and saw 845-850 once my utilization hit 0. Credit Karma still has me at 800.

  • I have 2 credit cards, one of which I use for all purchases to get points, but I almost end up maxing it each month. I pay it off in full so I never pay interest. If I'm at 90% on that card, but my other has a balance of 0, does this formula take that into account where it'll count total balance / total credit for all cards? Should I try to get the credit limit raised on my primary card just to have a better ratio?
    – Dan Breen
    Jan 16, 2013 at 19:11
  • 3
    It's the card bill balance divided by total credit lines. e.g. a $1K card always cycling $1K in purchases and another with $9K, but unused, it's a 10% utilization. Jan 16, 2013 at 21:17
  • Does the 1-20% is based on each card or on the sum total of the credit limit on all the cards. Thus for e.g. 2 cards of 5k, so 1-20% of 10k or 1-20% of each card? So if I spend 10k on 1 card and 8k on other card- is this the same as spending 18k on 1 card and 0k on another card?
    – pal4life
    Apr 25, 2014 at 13:10
  • The sum, all outstanding balances dived by total credit lines. Please re-read my prior comment. Apr 25, 2014 at 13:23
  • 1
    @BenMiller - edited into answer. Apr 28, 2017 at 10:31

Curious, why are you interested in building/improving your credit score?

Is it better to use your card and pay off the bill completely every month?


How is credit utiltization calculated? Is it average utilization over the month, or total amount owed/credit_limit per month?

It depends on how often your bank reports your balances to the reporting agencies. It can be daily, when your statement cycle closes, or some other interval.

How does credit utilization affect your score?

Closest to zero without actually being zero is best. This translates to making some charges, even $1 so your statement shows a balance each statement that you pay off. This shows as active use. If you pay off your balance before the statement closes, then it can sometimes be reported as inactive/unused.

Is too much a bad thing?


Is too little a bad thing?

Depends. Being debt free has its advantages... but if your goal is to raise your credit score, then having a low utilization rate is a good metric. Less than 7% utilization seems to be the optimal level.

"Last year we started using a number, not as a recommendation, but as a fact that most of the people with really high FICO scores have credit utilization rates that are 7 percent or lower," Watts said.

Read more: http://www.bankrate.com/finance/credit-cards/how-to-bump-up-your-credit-score.aspx

Remember that on-time payment is the most important factor. Second is how much you owe. Third is length of credit history. Maintain these factors in good standing and you will improve your score: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

  • I am debt free. The problem is that my score dropped significantly after getting rid of the car debt. Not have a history of credit makes getting loans in the future difficult, nice travel reward cards difficult, etc
    – monksy
    Jan 16, 2013 at 2:35
  • 1
    How significantly? If you are still within the same band (See JoeTaxpayer's answer) the effect should be negligible of a lower credit rating.
    – JohnFx
    Jan 16, 2013 at 16:59
  • 1
    @monsky Joe's chart image for 0% utilization could explain your situation. Keep in mind that your score changes every month so you can have 0% utilization then have a balance on your statement a few months before you are looking for a loan or applying for a credit card. You can check your credit score free with CreditKarma or CreditSesame to see how you can manipulate your score without having to carry debt beforehand.
    – Sun
    Jan 16, 2013 at 17:44

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