Credit Card Utilization – How much you use can affect your credit score

Credit card utilization isn’t something that gets a lot of airplay but is a key factor in how reporting agencies calculate your credit report and credit score. You shouldn’t overlook in how managing your rate of utilization can improve your credit score. A better credit score makes you more likely to get those better deals.


Man's back pocket with credit card filled wallet peaking out.


What is it?

In a nut shell, it is the percentage of the credit available to you that you use.


Why is it important?

High credit card utilization is a sign that you could be using your credit as a crutch or living beyond your means and therefore a greater lending risk. Greater lending risk equals a lower credit score.


How do you calculate it?

Many money experts suggest that credit card utilization is optimum at 35% or less than the total amount of credit available to you. That means that a card with a $2500 limit should carry no more than $875 in charges.


How to improve your Credit Card Utilization.

You can use the following strategies to improve it.

  1. Increase your credit limit. The key to this working is to not increase your spending. You need to increase the gap between how much you can use and how much are using.
  1. Pay down your existing debt. Pay more than the minimum each month before the due date. You can make the minimum payment before the due date and a secondary payment later through the month. It can take the sting out of a single large lump sum payment and sets up easily if your pay cheques are bi-weekly or semi-monthly. An extra $50 a month can make an appreciable difference.
  1. Apply for another card. Doing so will impact your credit in the short term but even if you set it up to pay your Netflix and arrange for automatic payments through your bank then it is taken as positive activity. Again, the key is to not increase your spending. Take a service or subscription that you already have and transfer the payment arrangement to the new card.
  1. Leave cards open after paying them off. Your zero balance cards work to increase your available credit without increasing your credit card utilization.
  1. Consolidate your debt with a personal loan. All of your debt is rolled into one monthly payment at a lower interest rate which is great in a couple of different ways. You only have to worry about one monthly payment instead of juggling multiple payment dates. A consolidation loan is often at a lower interest rate which means that more of your payment goes towards knocking down your actual debt instead of being eaten up by covering the interest charges.


Healthy credit takes into account several factors and credit card utilization only makes up 30% of your score. Other factors include your payment history, length of credit history, types of credit and new credit.

At PYLO Finance Inc., we believe that understanding your credit means that you can make better financial decisions. Our team is available if you have questions about about how a loan can help provide you with positive reporting on your credit history and improve your score.


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Disclaimer: This Blog/Web Site is made available by PYLO Finance Inc. for general educational purposes only and you should seek appropriate counsel for your specific situation. This Bog/Web Site should not be used as a substitute for competent advice from licensed professionals and councilors in your province.

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