This Was Consumers’ Average Credit Utilization Ratio in December — and Why It Was Too High

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It’s a number you really want to keep under control. 

Your credit utilization ratio is one of those things you probably don’t spend much time thinking about. Heck, you may not even know what a credit utilization ratio is.

In that case, here’s a primer. Your credit utilization ratio measures the amount of revolving credit you’re using at once. If your total credit limit across your various credit cards is $10,000, and you’ve racked up a $2,500 balance, that puts your credit utilization ratio at 25%.

According to a recent report from VantageScore, the average credit utilization ratio among consumers was 31% as of December 2022. That may not seem too high, but it could be problematic for one big reason.

You want to keep that ratio low

The more of your available credit you use at once, the more of a borrowing risk you might come across as to lenders. And so it’s helpful to keep your credit utilization ratio to 30% or below.

Once your credit utilization ratio exceeds the 30% mark, it can start to cause credit score damage. And once that happens, it can become more difficult to qualify for a loan or an affordable interest rate on one.

As such, an average credit utilization ratio of 31% among consumers isn’t so great. It’s not horrendous, but it means that the typical credit card user is just above that ideal 30% threshold to avoid credit score damage.

How to bring down your credit utilization ratio

If you’re not sure what your credit utilization ratio looks like, access a free copy of your credit report, and you should get the answer there. If your credit utilization ratio is above 30%, it’s in your best interest to bring it down. And one effective way to do so is to simply pay off some of your existing credit card balances.

Doing so won’t only help your credit score improve. It could also save you money. After all, the less of a balance you carry forward on your credit cards, the less interest you accrue.

Another way to bring down your credit utilization ratio is to get a spending limit increase on your credit cards. If you’re a cardholder in good standing, you can usually ask your credit card companies for a credit limit increase every so often.

In some cases, you may have to show proof of a higher income to get that request granted. And you’ll also need to be current on your bills (which means being timely with your minimum monthly payments). But if you can satisfy those criteria, your credit card issuers might raise your credit limit, and that could help your credit utilization ratio shrink.

A number to watch

It’s not every day that your credit utilization ratio is something you think to check on or work on. But the lower that ratio, the more it can help your credit score. And so if you’re on the cusp of applying for a large loan, like a mortgage, then it definitely pays to keep tabs on your credit utilization ratio and make sure it’s in decent shape.

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