5 Tips for Lowering Your Credit Utilization

Your credit utilization is the portion of your available credit you use, expressed as a percentage. For example, if you spend $400 on a credit card that has a $1,000 credit limit, your credit utilization for that card would be 40%.

When calculating your credit scores, companies like FICO and VantageScore rank credit utilization as the second most important factor — just after payment history. So, it’s important to keep an eye on how much you’re spending in relation to your credit limits. 

The less available credit you use, the better it is for your score. Your goal should be to keep your utilization at 30% of your available credit or less. But if a financial crisis means you have to lean on credit cards, take heart: Credit scores can rebound quickly once you're able to lower your utilization.

Here are five tips for keeping your utilization low.

How to lower your credit utilization

1. Monitor your spending to keep credit card charges to a minimum

Watching how much you charge to each card is the simplest way to avoid taking a hit to your credit score for using too much of your limits. Make a habit of patrolling your online accounts to keep tabs on spending. If you are close to using 30% of your credit limit on one card, try to make a payment or switch to using another card.

Simply getting into the habit of paying twice per month instead of once could help you decrease your credit usage. Lower balances can save you interest if you carry a balance — and are good for your credit score regardless.

» Monitor your credit utilization: View your credit score profile from NerdWallet

2. Find ways to increase your credit limits

A higher overall credit limit could help you keep your credit utilization lower than it would be otherwise and could make a big difference in your credit score. A $400 balance on a card with a $1,000 limit is 40% utilization, but if you get that limit raised to $2,000, the utilization drops to 20%.

Getting a credit limit increase might require you to call your card issuer or make the request online. They’ll likely ask you some questions about your income, so they can assess your ability to pay back any increased debt. Some issuers will do a “hard pull” or inquiry on your credit, which could temporarily cause your score to drop. A “soft pull” is also a possibility, but this type of inquiry doesn’t impact your score.

Sometimes increases are offered automatically if you’ve had your card for a while and have a positive payment history, so be on the lookout for those offers when you log in to your account.

After a month, you can check your credit to see the effect. Checking your credit doesn’t harm your score, and it’s free. 

Another option to get a higher overall credit limit is to ask a friend or relative to add you as an authorized user on an established account. As an authorized user, your total available credit will get a boost because your friend or relative’s account will be added to your credit history. Their $2,000 credit limit, for example, will be added to your own credit limits.

» MORE: How does being an authorized user build credit?

The primary user doesn't even have to give you a card or tell you the account number for your credit score to benefit. If the agreement is that you don’t actually use the card, you’ll benefit from your friend or family member’s strong credit practices, like on-time payments or lengthy credit history — without any responsibility for paying the monthly bill.

Do choose carefully: Being on the account of someone who is having problems with credit could affect your score, too. You want to be on an account showing good payment history, preferably with a high credit limit and consistently low credit utilization.

3. Don't close existing credit cards

It might be tempting to close a credit card to prevent overspending or because it’s old or rarely used, but resist the urge. Closing a credit card will lower your overall available credit and cause your credit utilization to spike.

Take this example: You have $25,000 in total available credit across three credit cards and have used $5,000. If you close one of those cards, that overall credit limit drops while that $5,000 remains, taking up a larger portion of your new available credit.

Closing a credit card might also shorten the age of your credit, especially if you close your oldest credit account. The length of your credit history, or credit age, impacts your credit score — the longer your history with credit, the better. So keep this in mind as you’re assessing the cards in your wallet.

4. Pay your bill before your issuer reports to the credit bureaus

Most credit card issuers report your balance and payment activity to the credit bureaus once every 30 days. However, not every lender reports information to every credit bureau, and this reporting date doesn’t necessarily align with when your bill is due. If your issuer reports a few days before the end of your billing cycle, you’ll consistently look like you’re carrying a high balance — even if you pay it off in full just a few days later.

Place a call to your card issuer’s customer service line to find out when it reports to the credit bureaus. Pay off as much of your balance as you can in advance of that date every month, and you might see a jump in your score.

5. Monitor your total credit utilization

If you have multiple credit cards, it might be hard to view the bigger picture of your credit utilization.

So try this: Using the calculator below, input your credit card balances and limits to check whether you're under the recommended 30% utilization threshold. If you’re creeping up to that limit, do your best to pay down your balances, and consider signing up with your credit card issuer for email or text alerts. Get notified when your balance reaches a certain threshold, like a specific dollar amount or percentage of your credit limit.