What Percent of Your Credit Card Limit Should You Use?
- Less Than 10%
Financial advisors use to advise their clients to keep their credit card utilization at 30 percent. This percentage is no longer recommended, as it proved too easy for people to let it rise to 40 and even 50 percent without much thought. Now, you’re encouraged to keep your utilization between 10 and 20 percent. Less than 10 is unfeasible for most, and more than 20 starts to reach dangerous ground.
Your credit card utilization percentage plays a major role in determining your credit score. A high percentage means you’re using up most of your credit line. You’ll experience a lower credit score since you haven’t paid off the debt you owe.
A low percentage earns you a higher score. It indicates you have kept your debt to a minimum and regularly paid off what you owe to the credit card company or other lender. Going just a few notches higher on the percent scale is not going to make significant chances to your score, so there is some leeway for you to work with.
The reason the percentage is not listed at zero is because it wouldn’t help you gain any sort of improvement. Potential lenders want to see that you can maintain an open line of credit by using it responsibly and making your payments on time. Keeping the balance at a low amount at all times helps to keep your score in the higher range.