How much credit utilization is ideal?

[Ben]

I know that low credit utilization is critical, but what is the ideal utilization?

[Stacy Wall]

1%-9% is ideal (certain limitations apply)

You won’t find it in written in the Fico formula, but the common conception is that the ideal credit utilization is 1%-9%, with not more than 50% or your revolving credit accounts reporting balance.

This means that if you have 4 credit cards, at least two of them must show zero balance, and the combined balance of the other two must be low, between 1% and 9% of your combined credit limit on all 4 cards!

Another thing to keep in mind is that there’s a difference between the 3 major credit bureaus. While Transunion “likes” to see 0% utilization and may reward you with a few points, Equifax will do just the opposite and actually “prefers” 1% utilization on 0%. I’m not sure about Experian.

It’s important to note that the above rules of the thumb are just that. Everyone’s situation is different and there’s no one size fits all approach. For some 1%-3% utilization will yield best results, while 5%-7% will be best for others. The 50% rule however does seem to benefit all users.

Last but not least – remember that this is only small scale tweaking. I’d only do this as a “hobby” – to see how high I can get my score, but I won’t turn this into a religion,

Side Note
Zero balance doesn’t mean not using your cards. You can use them as much as you like, but since most cards report your monthly statement to the credit bureaus, you will need to pay them off just a few days before the closing date, so that your statements read zero!

[Author]

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