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I know that your credit utilization affects your credit score, but I have a question about how exactly this is calculated. Suppose I have two credit cards:

  • Card A has a credit limit of $1000 and I’ve put $30 on it.
  • Card B has a credit limit of $500 and I’ve put $450 on it.

Credit utilization is the amount of credit you’ve used divided by the total amount of credit you have available. I see two obvious ways to calculate the overall credit utilization:

  1. Take the total amount of credit used and divide it by the total amount of credit available.

    In my example, this number would be (30+450)/(1000+500) = 32%.

  2. Calculate the utilization for each card individually and average these numbers together.

    In my example, this would be the average of 30/1000 and 450/500, which is 47%.

Which of these methods is used to determine the credit-utilization part of my credit score?

(I’m curious because one of my credit cards has a much higher credit limit than the others, but the lower-limit ones have better rewards. Assuming that my total spending remains fixed, I’m curious whether shifting this balance onto the lower-limit cards has any effect on my credit score.)

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The utilization calculation used by FICO is total credit. They take a wide view of your credit. So what your outstanding balances are divided by your total credit limits. They don't calculate individually. Hope that helps answer your question.

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  • they take a wide view of your credit I've noticed this as well, particularly with student loans. Do you happen to know how they judge your "limit" on those?
    – jonsca
    Feb 11, 2014 at 19:26
  • (should probably be its own question but if you happened to have come across it in your travels)
    – jonsca
    Feb 11, 2014 at 19:29
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    @jonsca good question, the student loans are considered "installment loans" and therefore factor in another portion of the score calculation and not your utilization. Its also where your personal loans, car loans, mortgages, business loans, etc factor. For those who don't have those loans, ironically the presence of the student loan HELPS your score by making you more well rounded. Having a store card (such as Gas card, department store card) helps as well in another section of your score but don't have too many. I'd be happy to give you more tips if you want to get a hold of me later.
    – GµårÐïåñ
    Feb 11, 2014 at 23:08
  • Thanks for the answer! This answer to another question indicates that per-card utilization does matter… any idea why the discrepancy?
    – bdesham
    Feb 12, 2014 at 14:06
  • @bdesham You are most welcome. With all due deference to our beloved community, not everyone has been able to review the ACTUAL Fair Isaac (FICO) documentations on how the score is computed. This is a very well guarded secret to avoid gaming of the system. Most of the information out there is unfortunately based on anecdotal evidence or guessing based on the FACO (non-FICO Vantage or bureau specific scores which no one uses) formulations which can lead to a lot of bad advice and information.
    – GµårÐïåñ
    Feb 12, 2014 at 19:58

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