1. What is Credit Utilization?

Credit utilization is the ratio of your credit card balance to your credit limit, expressed as a percentage. It's a key factor in calculating your credit score.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Balance \) — Recommended credit card balance (USD)
• \( Limit \) — Your credit card limit (USD)
• \( 0.30 \) — The optimal 30% utilization rate

Explanation: This calculates the balance amount that would result in a 30% credit utilization rate, which is generally recommended for maintaining good credit health.

3. Importance of 30% Credit Utilization

Details: Maintaining credit utilization below 30% demonstrates responsible credit management to lenders and can help improve your credit score. Utilization above 30% may negatively impact your score.

4. Using the Calculator

Tips: Enter your total credit limit in USD. The calculator will show the maximum recommended balance to maintain 30% utilization. For multiple cards, calculate each separately or sum all limits for total utilization.

5. Frequently Asked Questions (FAQ)

Q1: Why is 30% the recommended utilization rate?
A: While lower is better, 30% is a commonly cited threshold where utilization starts to significantly impact credit scores negatively.

Q2: Should I keep all cards below 30% or just the total?
A: Both matter. Ideally, keep each card and your total utilization below 30% for optimal scoring.

Q3: How often is utilization calculated?
A: Credit card companies typically report balances to bureaus once per month, usually on your statement date.

Q4: Is 30% utilization required for a good score?
A: No, but it's a good guideline. People with excellent scores often have utilization below 10%.

Q5: Does paying off balances multiple times per month help?
A: Yes, making payments before the statement date can lower your reported utilization.