Credit Utilisation: Why 30% Is the Number You Keep Hearing

Credit utilisation is the percentage of your available revolving credit that is currently being used. It is the second-largest input into a FICO score, behind only payment history, and it moves faster than any other factor — a single billing cycle can shift it significantly.

How utilisation is calculated

Utilisation is calculated in two ways at the same time. Per-card utilisation looks at each individual credit card: a $600 balance on a card with a $2,000 limit is 30% per-card utilisation. Overall utilisation aggregates all revolving credit: $600 total balance across cards with a combined $10,000 limit is 6% overall utilisation. Both figures affect the score, and a very high balance on one card can hurt even if overall utilisation is low.

The 30% rule — and why 10% is a better target

"Keep utilisation under 30%" is a widely repeated guideline, and 30% is the level above which scores commonly begin to drop noticeably. But scoring models generally reward lower utilisation continuously, not just at 30%. Borrowers targeting the highest scores usually aim for utilisation below 10%, with a small positive balance rather than $0 (which shows the card is being used but not being carried heavily).

Statement date versus due date

The utilisation reported to the bureaus is normally the balance on your statement closing date — not the payment due date. This is the mechanical fact that most people miss. Paying the statement balance in full by the due date avoids interest but does not lower the utilisation reported for that cycle. To lower reported utilisation, pay the balance down before the statement closes.

A practical routine: check your card's statement close date, then set an alert or manual payment about a week beforehand to pay the balance down to your target utilisation. Your statement will then post with a low balance and low reported utilisation.

How to lower utilisation quickly

Four moves work in the short term. First, pay balances down before statement close. Second, request a credit-limit increase on existing cards — the same balance on a larger limit is lower utilisation. Third, open a new card to expand total available credit (accepting a small temporary hit from the hard inquiry and the shorter average age of accounts). Fourth, make multiple payments per month if you use the card heavily but want to keep reported utilisation low.

When utilisation matters most

Utilisation matters most in the weeks leading up to a major credit application (a mortgage, auto loan, or premium credit card). Because the effect is fast, taking utilisation from 40% down to 5% one to two billing cycles before applying can meaningfully raise the score seen by the lender. Return to normal usage afterward — you do not need to keep utilisation at 5% every month, only when a score-sensitive event is coming.