Should I Keep Credit Card Balance Below 30%

Many credit experts say you should keep your credit utilization ratio — the percentage of your total credit that you apply — beneath 30% to maintain a good or splendid credit score.

Credit utilization is a major factor in your credit score, then it pays to keep an heart on it. View the 30% dominion equally a good guideline, but exist aware that using even less is ameliorate for your score.

Keeping up with what percentage of your credit limits you're using is easier than yous may think. You can set alerts with your credit carte issuers and/or get regular reports from personal finance sites on how much of your credit you're using. NerdWallet's report is free and updates weekly.

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Myth or guideline?

If there's no brilliant line, why the 30% rule? Information technology'southward likely because the recommendation to keep your credit utilization low invariably prompts the question, "How low?" The 30% reply finds some backing from the credit agency Experian.

Experian uses the VantageScore , which is a competitor to the traditional FICO score. "The 30% level is not a target, only rather is a maximum limit. Exceeding that level will have significantly negative bear on on credit scores," says Rod Griffin, Experian's director of public education.

"The lower a person's utilization charge per unit, the ameliorate from a scoring standpoint," he says.

The FICO scoring model seems to agree with this decision. "Consumers with FICO scores of 800 use, on average, vii% of their available credit," says Can Arkali, a senior director for FICO.

Credit utilization and your score

How much y'all owe on your credit cards relative to your credit limits makes up almost thirty% of your FICO score, while VantageScore says credit utilization is "highly influential." (Check out your free credit score to see how yous're doing on utilization for your specific credit card accounts.)

Note that your credit score is composed of a number of factors . If your overall credit profile is fantabulous, it's unlikely that your credit score will plunge if your credit utilization ratio rises slightly ane month.

And, happily, damage from credit utilization is easily reversed . With the vast majority of scores, equally soon every bit a new, lower residue (or lower credit utilization) is reported to credit bureaus , the damage is undone.

What's next?

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