Does Credit Utilization Matter if You Pay in Full?

Yes, it does. Even if you pay your balance in full each month, your credit utilization ratio can still affect your score. Here's why.

Your FICO score looks at more than overall utilization

When checking your credit score, don't just focus on your total utilization. That's only part of the story.

Many people say "My utilization is only 10%" and wonder why their score isn't higher. The truth is that FICO looks at both your overall utilization AND your individual card utilization.

How FICO views your credit card usage

FICO doesn't share their exact formula, but we know that "Amounts Owed" makes up about 30% of your score. Most of that (around 150 points) comes from credit card utilization.

This breaks down into two main parts:

1. Overall Utilization (90-100 points)

This is all your card balances divided by all your credit limits. Higher percentages hurt your score:

• 9-29%: small impact

• 29-49%: moderate impact

• 49%+: larger impact

• 89%+: severe impact

2. Individual Card Utilization (about 50 points)

Even if your overall utilization is low, maxing out individual cards can hurt you.

What actually happens when you pay in full

When you pay your card in full each month, that's great for avoiding interest. But credit bureaus only see what your card issuer reports - usually your statement balance.

So if your statement closes with $450 on a $500 limit card, that's 90% utilization - even if you pay it off completely the next day.

What to do about utilization

1. Watch your statement closing dates: Pay down balances before your statement closes to show lower utilization.

2. Target high individual card utilization first: If you have one card at 90% and the rest at 10%, pay down the 90% card first.

3. Be careful with low-limit cards: A $450 balance on a $500 card hurts more than a $900 balance on a $10,000 card.

4. Don't assume new cards will fix everything: Getting more cards helps with overall utilization but might not immediately help with individual utilization issues.

Why this is important

You could be losing 20-30 points on your score from high individual card utilization, even if your overall utilization looks good.

For example, if you have a $10,000 AMEX card with $0 balance and a $500 TD card reporting $450, you might be losing points even though your overall utilization is under 5%.

Pay attention to both types of utilization, especially when you're trying to improve your score or apply for new credit.