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What Percentage of Your Credit Limit Should You Use?

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If you want to maintain a solid credit score, what percentage of your credit limit should you actually use? Is there a magic number for a total amount of credit that you should take up, or does it not matter as long as you don’t go over your limit?

First, a little background. As we know, your utilization of credit is one of the most important factors in your credit score. You don’t want to be using up all of your credit (or close to it), because then you will look like a major credit risk, and your credit score will drop. That is because you wouldn’t have much financial leeway in those cases.

So, we know that it is not a good idea to use your entire credit limit, or close to it. That is why increasing your limit can be such a powerful financial tool, as long as you use it wisely.

So, how much of your credit limit should you use? A common rule of thumb is that you don’t want to be using more than 30% of your credit limit, because you could see a ding in your credit score. It might be short-term (if you pay things off quickly), but that is a good rule of thumb. I have read some places that suggest a 40% limit, but usually it is recommended not to go over 30% if you can.

This is especially true if you aren’t able to pay off the card every month, as you hopefully are doing. If you are consistently carrying a credit balance that is more than 30% of your total credit limit, that could be seen as a negative thing by the creduit bureaus, and your score will drop accordingly.

One question that could naturally arise – if you have more than one credit card, should you try to stick to under that 30% as a whole, or fall below that on each credit card. In an ideal situation, you will be under the 30% utilization both collectively and on each individual credit card. Certainly, the biggest thing will be keeping it under that total for the balance of your credit, but it would be beneficial to stay below it on each card as well.

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