What is a Good Credit Utilization Rate?

Your credit utilization ratio is simply how much credit you're using compared to how much you have available. It's a big deal for your credit score – actually one of the top two factors that affect it.

What's the ideal credit utilization rate?

Try to stay below 30%. For excellent credit scores, aim for 10% or less. People with exceptional credit scores (800+) typically keep their utilization under 10% on each card.

Why your credit utilization matters

How you use your cards affects your credit score. Keep this in mind when you spend throughout the month, and before opening or closing credit cards, since any change to your available credit directly impacts your ratio.

Credit bureaus look at this number to judge how well you handle credit. A lower ratio shows you're using credit wisely, which helps when applying for loans or new cards.

How to calculate your ratio

1. Add up all your credit card balances

2. Add up all your credit limits (even for cards you don't use)

3. Divide your total balance by your total limit

4. Multiply by 100 to get your percentage

Example:

• Your total balance: $1,000

• Your total credit limit: $5,000

• $1,000 ÷ $5,000 = 0.2

• 0.2 × 100 = 20% utilization

How to lower your ratio

You can either increase your available credit or decrease what you owe.

Keep unused cards open

Even cards you don't use add to your available credit. Closing a card with a $5,000 limit instantly raises your utilization because you've lost that available credit.

One exception: if the card has an annual fee, you might want to close it to avoid the cost. Just know how this will affect your ratio first.

Open a new credit card

Adding a new card increases your available credit. But consider this carefully – applying causes a temporary hit to your score from the hard credit check. Also factor in any annual fees.

Pay down your balances

The most straightforward approach: pay off what you owe.

Ask for higher limits

Call your card issuer to request a credit limit increase. Even a small boost helps lower your ratio.

How KOHO Credit Builder can help

While you're working to improve your credit utilization, you also need to strengthen other aspects of your credit profile.

What makes KOHO Credit Builder worth considering:

• No credit check required

• Guaranteed approval

• No security deposit needed

• Access to financial coaches who can guide your credit journey

• Ability to track your Equifax credit score directly in the app

To get started, just open the KOHO app and tap Credit > Subscribe to Credit Building.

Common questions about utilization

Is 10% good? Yes, it's excellent, especially if you pay your balance on time each month. Lenders view this very favorably.

Is 25% good? Yes, 25% is good. Anything under 30% puts you on track for a better credit score.

Is 50% good? No, 50% isn't ideal. Using half your available credit may signal to lenders that you're struggling with debt or carrying balances month to month.

Keep your credit healthy

Check your credit report regularly to see how your utilization affects your score. You can easily calculate your ratio using the steps above. For the best results, keep your utilization under 30%.