Credit utilization rate: What is it, and why should you keep yours low?

Experts generally agree that the single best thing you can do to build great credit is to pay your bills on time. One more thing that can help is keeping your overall amount of debt low. So, paying off your credit card balances in full every month will help build good credit too.

But if you want to build great credit as efficiently as possible, don’t stop there. Be sure to tackle your credit utilization rate as well.   

What is credit utilization rate?

Credit utilization rate refers to the highest percentage of your available credit that you use throughout any given month.  

How can I use my credit utilization rate to build better credit?

Keep your credit balance well below your available credit limit throughout any given month. This does not mean you should avoid using your card. Go ahead and use your credit card as usual, but make a payment whenever your balance approaches 30% of your credit limit. 30% is the recommended threshold for building your credit efficiently.

Is there an “ideal” credit utilization rate to aim for?

There’s no clear answer to this question, but as a general guideline, think of 30% as the upper limit, and try to go lower. Here’s an interesting insight from Can Arkali, principal scientist for FICO: “Consumers with FICO scores of 800 use, on average, 7% of their available credit.”

What’s the best way to maintain a good credit utilization rate?

Keeping track of your credit utilization rate throughout the month can be tedious and time consuming. But its impact on your credit score is so important that we at Jasper decided we needed to help customers track and optimize it. To learn more about Jasper’s unique auto pay schedule based on credit utilization, explore the Jasper app.

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