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I have been told to never go over 50% of my credit limit on any credit card even if I pay always off in full for each statement, in order not to hurt my credit score. Is this true? What is the ratio that I should always stay under?

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Since the FICO / FICO 2 credit score formulas are secret, we don't really know. However I have done research online and the consensus seems to be that stay under 50% if possible and absolutely stay under 90% on any card.

For overall ratio of debt to credit limit, it's the lower the better.

Personally I don't think go over 50% is a big deal. In the past I went as high as 89% on a few of my credit cards when I opened 0% credit card accounts and my credit score has always been fine (now at 780-800 on a 850 scale).

  • I also think it is based on a running average, so going up that high once in a while probably will only put a minor and very temporary dent in your rating. – JohnFx Aug 10 '10 at 16:16
  • @JohnFx No. I've watched my score take a substantial dip from high utilization on one card, it bounced back as soon as the bill was paid. – Loren Pechtel Aug 13 '16 at 21:30
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According to this article by LaToya Irby, paying off your card each month doesn't help you with respect to the credit utilization part of your score

You can't trick the FICO score into thinking your credit utilization is low by paying your balance in full at the end of each month. Even though your credit card balance will be $0 at the time, that might not be the balance that was reported to the credit bureaus. That's because you can't predict the exact point in time when your credit card issuer is going to report your balance to the credit bureaus. If your balance is high when your issuer sends your data to the bureaus, then the credit utilization used in your credit score will also be high. To keep a low credit utilization, you should always keep a low credit card balance.

As to the exact ratios you should keep, the formula is a well guarded secret by the credit industry. I've heard 50% is a good total guideline, but keep in mind that means to keep under this ration for your total credit usage as well as for each card.

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50% utilization is way too high, according to sites like CreditKarma, and even if you read TransUnion and Experian literature on this. Their suggestion is that utilization should stay below 30%.

JohnFx makes an excellent point that paying off your cards before the end of the billing cycle has nothing to do with the utilization rates reported to the bureaus. Capital One and Discover report changes in utilization very frequently, so a spike in your usage could have an adverse affect on your score.

That being said, your credit score changes all the time, virtually daily, based on information on hand. I don't worry what my score is on a day-to-day basis. What I focus on is what my score is when I'm preparing to apply for new credit where the score determines my interest rate or the credit limit I'm given. So, I will make sure that my cards are paid down well ahead of making applications just to be sure the utilization rates (and the corresponding effects on my score) have been properly reported.

I hope this helps.

Good luck!

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