What Is a Credit Utilization Ratio?

Credit utilization ratio is an important factor in your credit score and measures how much of your available credit you’re using


Credit utilization is a measure of how much of your available credit you’re using. And it applies to revolving credit accounts like credit cards, personal lines of credit and home equity lines of credit. It’s sometimes called a credit utilization ratio, but it’s often expressed as a percentage.

But why does your credit utilization ratio matter? It’s an important factor in calculating your credit score. And the lower your credit utilization, the better your credit score might be.

How to Calculate Your Credit Utilization

Two numbers can help you calculate your credit utilization. One of them is the amount you owe across all of your revolving credit accounts. The other is your total credit limit.

To calculate your credit utilization, follow these four steps:

  1. Add up all of your revolving credit balances.
  2. Add up all of your credit limits.
  3. Divide your total revolving credit balance (from Step 1) by your total credit limit (from Step 2).
  4. Multiply that number (from Step 3) by 100 to see your credit utilization as a percentage.

For example, say your only line of credit is a credit card with a $2,000 limit. If your balance is $1,000, your credit utilization ratio, expressed as a percentage, would be 50%.

What Is a Good Credit Utilization Ratio?

According to the Consumer Financial Protection Bureau, experts recommend keeping your credit utilization below 30% of your available credit. So if your only line of credit is a credit card with a $2,000 limit, that would mean keeping your balance below $600.

A low credit utilization ratio could be a sign that you’re using your credit responsibly and not overspending. And that could help you keep a good credit score or even improve your score.

But the opposite is also true: A high credit utilization ratio could have a negative effect on your credit score. And credit utilization isn’t the only factor impacting your score. Other factors, like late or missed payments, can negatively impact your score too—even if your credit utilization is low.

How to Monitor Your Credit for Free With CreditWise


It’s a good idea to monitor your credit so you can keep an eye on your credit utilization and other factors that impact your credit score.

With CreditWise from Capital One, you can access your free TransUnion® credit reports and weekly VantageScore® 3.0 credit score anytime, without negatively impacting your score. You can even see the potential impacts of financial decisions on your credit score before you make them with the Credit Simulator.

CreditWise is free and available to everyone—not just Capital One customers.

You can also get free copies of your credit reports from all three major credit bureaus—Equifax®, Experian® and TransUnion. Call 877-322-8228 or visit AnnualCreditReport.com to learn how.


Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many scoring models used by lenders. It likely won’t be the same model your lender uses, but it is an accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Alerts are based on changes to your TransUnion and Experian® credit reports and information we find on the dark web. The tool is not guaranteed to detect all identity theft.

The CreditWise Simulator provides an estimate of your score change and does not guarantee how your score may change.

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