Our top picks of timely offers from our partners

More details
Americor Debt Relief
Learn More
Terms Apply
Our top pick for customer satisfaction and, Americor has lower fees than some competitors
Choice Home Warranty
Learn More
Terms Apply
Protects 25+ systems & appliances. Free quote + $50 off + 1 month free
Learn More
Terms Apply
Helps protect your data and online identity. Take advantage of up to 52% off the first year. Get protected today.
UFB Secure Savings
Learn More
Terms Apply
Up to 5.25% APY on one of our top picks for best savings accounts plus, no monthly fee
LendingClub High-Yield Savings
Learn More
Terms Apply
Our top pick for best savings accounts for its strong APY and an ATM card with no ATM fees
Select independently determines what we cover and recommend. We earn a commission from affiliate partners on many offers and links. This commission may impact how and where certain products appear on this site (including, for example, the order in which they appear). Read more about Select on CNBC and on NBC News, and click here to read our full advertiser disclosure.

What is a credit utilization rate and how to calculate yours

Credit utilization is the percentage of your total credit you're using. CNBC Select explains how you can calculate your credit utilization rate.

Getty Images

When you open a credit card, you'll often hear advice on keeping a low credit utilization rate in order to achieve a good credit score.

Credit utilization is the percentage of your total credit you're using, also known as amounts owed. Your credit utilization is the second-most important factor of your credit score (behind payment history), so it's therefore essential to learn all you can about maintaining a healthy ratio.

The general rule of thumb is to keep a credit utilization below 30%, but a FICO study found that "high-achievers" — consumers with credit scores 750 and above — use less than 10% of their total available credit limit. You should aim to keep your credit utilization rate as low as possible in order to avoid hurting your credit score, but not necessarily as low as 0%.

While free credit score resources provide your credit utilization rate, it may only be updated once a month, so you may want to do the math yourself in between updates. Below, CNBC Select reviews how you can calculate your credit utilization rate.

How to calculate your credit utilization rate

In order to calculate your credit utilization rate, you'll need to gather some information about your credit card accounts. (Take note, charge cards are not factored into your credit utilization rate since they have no predetermined credit limit.)

Once you have your credit products, gather the balance and credit limit for each card and begin calculations.

Let's take an example where you have three credit cards:

Balance Credit limit
Card A$250$2,000
Card B$750$6,000
Card C$3,000$12,000

To find your utilization rate, divide your total balance ($4,000) by your total credit limit ($20,000). Then, multiply by 100 to get the percentage.

Here's the math: $4,000 / $20,000 = 0.2 x 100 = 20%

You can also calculate your utilization rate separately for each credit card, but your credit score focuses on your total credit utilization rate across all cards.

Factors that influence your credit utilization rate

Your credit utilization is influenced by three main factors: the opening or closing of accounts, the balance and the credit limit on your accounts.

If you open a new credit card and maintain the same spending as before, you'll see an increase in your credit limit, which boosts your credit utilization rate. But if you close a credit card, that decreases your total available credit limit and reduces your credit utilization rate, which may cause a dip in your credit score.

When you increase spending on one or more credit cards, your utilization rate will increase as well. This can lower your credit score.

On the other hand, a decrease in spending and/or an increase in your credit limit can result in a lower utilization rate and higher credit score.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Find the right savings account for you
Learn More
Terms Apply
Help your money grow by finding the savings account that offers the best rates and features for you
Learn More
Terms Apply
Chime offers online-only accounts that minimize fees plus, get paid up to 2 days early with direct deposits