If you're trying to improve your credit score, one of the fastest levers you can pull is credit utilization. It's less talked about than payment history, but it carries a lot of weight, and unlike some factors, you can change it quickly.
What credit utilization means
Credit utilization is the share of your available revolving credit that you're currently using. If your cards have a combined limit of $10,000 and you're carrying $3,000, your utilization is 30%.
It's measured both per card and across all your cards combined, so a single maxed-out card can drag things down even if your overall number looks fine.
Why it matters so much
Amounts owed, which is largely driven by utilization, makes up roughly 30% of a typical FICO score, second only to payment history. Lenders read high utilization as a sign you may be stretched thin.
A common guideline is to keep utilization under 30%, and lower is better. People with the best scores often sit in the single digits.
Simple ways to lower it
You have a few options. Pay down balances, especially on cards closest to their limit. Make a payment before the statement closing date, since that's often the balance reported to the bureaus. Or ask for a credit limit increase, which raises your available credit and lowers the ratio, as long as you don't spend more.
Spreading a balance across two cards instead of maxing one can also help your per-card numbers.
A quick word on closing cards
Closing an old card can backfire. It reduces your total available credit, which can push your utilization up overnight. Unless a card has a fee that isn't worth paying, keeping it open, even lightly used, usually helps more than closing it.
