Find Out Your Ratio With a Credit Card Utilization Calculator

When building a good credit score, you have many variables to consider. FICO — the scoring model 90% of the top lenders use — considers five factors to determine credit score. 

These factors and their weight in determining your score are:

• Payment history (35%)

• Amounts owed (30%) 

• Length of credit history (15%)

• New credit (10%)

• Credit mix (10%) 

The “amounts owed” variable includes one very important factor: your credit utilization ratio. 

Credit card utilization is a significant part of your FICO score that too high of a ratio could be the difference between a good credit score and a fair score. 

With a credit card utilization calculator, you can quickly figure out your credit utilization ratio, determining if yours is too high or just right. Learn all about credit utilization, including how to calculate it, below. 

Credit card utilization and how it affects credit score

Credit card utilization is your credit card balances relative to the total credit limit on all your credit cards. It’s expressed as a percentage and is a relatively large factor in the FICO credit scoring model. 

Credit card utilization is part of the “amounts owed” factor in the FICO credit scoring model, which accounts for 30% of your credit score — the second-heaviest weighted factor.  

The “amounts owed” factor looks at several things, including your total debt, but FICO notes, "the amount of debt you have is not as significant to your credit score as your credit utilization." 

FICO puts so much weight on your credit utilization ratio because it indicates your overall financial health. If you use a lot of the credit extended to you, this could mean you’re in a financial bind. 

If your credit utilization rate gets too high, it’ll start to drag your FICO credit score down. 

Determining a good or bad credit utilization rate 

FICO doesn't peg a specific credit utilization ratio as good or bad, but there's a belief among experts that 30% credit utilization is the threshold you don't want to cross. Once you cross 30% credit utilization, they believe you’ll start seeing your credit score fall. 

However, others believe your credit utilization starts negatively impacting your credit score well before it reaches 30%. Some say anything over 5% utilization starts hurting your FICO score, but the impact becomes more severe as the credit utilization ratio continues to climb. 

So, the new rule of thumb with credit utilization ratio is to keep it as low as possible.

Credit card utilization calculator

Calculating your credit card utilization isn't difficult, but it takes a few steps to complete. The credit card utilization calculator formula is: 

(Total balances / Total available credit limit) x 100 = Credit utilization ratio.

Start by adding the total credit limit of all your credit cards. So, if you have two credit cards with $500 credit limits each, you'd have a total credit limit of $1,000. 

Next, add the balance on all your credit cards. You can use either your statement balance or your current balance. Using your statement balance will help you determine what credit utilization ratio creditors will see when they pull your credit report. Using your current balance will show your up-to-date credit utilization rate. For example, if one card had a $100 balance and the other had a $300 balance, you'd have $400 in credit card utilization. 

Finally, determine your credit card utilization rate by dividing the credit card utilization amount by the total credit limit. In our example, this would be a 40% credit utilization rate ($400 / $1,000 = 0.40 or 40%).

Here's another example of how this would work. Let's say you have four credit cards with the following credit limits and balances:

In the above example, your total balances would be $2,000 and your total credit limit would be $6,000. Divide $2,000 by $6,000 and then multiply that by 100 to get the credit utilization ratio of 33.33%.

How to keep your credit card utilization ratio low

To maintain a good credit score, one goal should be to keep your credit card utilization ratio as low as possible. You can do so by following a handful of tips. 

Setting a budget

Setting a monthly spending budget is key to keeping your credit card balances in check. Look at your monthly income and set your expenses to fit within this budget. This ensures you'll always have enough cash at the end of the month to pay off the credit card. It also makes personal finance sense to have a budget so you don't overspend. 

Practice restraint

It may be tempting to spend more freely when you have access to a credit card. Unfortunately, freely spending on your credit card can get you into big trouble financially and lead to a high credit utilization ratio. That high utilization ratio can, in turn, lower your credit score. 

One method is if you see something you like, but you can’t afford it without resorting to a credit card, put it back. Wait a few days. Do you still want that item or think about it at all? Chances are, you didn’t. If you still want the item after a few days, start a savings fund to buy it instead of charging it.

Paying off your statement balance before the due date

Your ultimate goal should be to pay off your credit card statement balance each month — the balance on your credit card at the end of a billing cycle. This allows you to take advantage of your credit card company’s interest grace period so you can avoid interest charges.

If you can't afford to pay off the entire statement balance now, pay as much as possible to minimize your interest charges. Your total credit utilization will increase when interest charges are added to your outstanding balance.

Opening a new credit card account

You can also lower your credit utilization rate by opening a new credit card account. 

Once you open the new account, the creditor will report the new credit limit on your credit report. The sudden increase to your combined credit limit will help lower your credit card utilization rate. 

There is a caveat to this. Opening a credit card will negatively impact your “new credit” and “length of credit” factors due to the hard credit inquiry, the new account added to your credit history and the lower average age of your credit history.

However, keep in mind these negative marks will correct themselves over time, and these factors carry significantly less weight than the credit utilization ratio. So, it may be a worthwhile tactic to help improve the more significant credit score factor.

Keep your credit score in top shape with a low credit card utilization

So much of your credit score rides on your credit card utilization, so it's critical to monitor it constantly. With the above credit utilization calculator, you can keep track of your credit utilization rate currently on your credit report and the real-time rate. 

Fortunately, this calculation is as simple as adding up all your credit card debt and dividing the result by your combined credit card limits. 

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