A lender would generally prefer a credit utilization rate below 30% on a credit card application. This rate indicates to lenders that the applicant is managing credit responsibly and not relying too heavily on available credit. Ideally, utilization in the single digits or below 10% is even better for creditworthiness, as it reflects very low credit risk.
Key Points on Credit Utilization for Lenders:
- A utilization rate under 30% is widely recommended to maintain a good credit score and appeal to lenders.
- Experts and credit bureaus often consider utilization below 10% or even 1-5% as ideal for the best credit scores.
- A rate that is too high, such as over 30-50%, signals potential financial stress and may lead to lower chances of approval or higher interest rates.
- A zero utilization rate can sometimes be less favorable than a low but non-zero rate since some credit usage demonstrates responsible handling of credit.
Therefore, a credit utilization rate of around 10% or less would be preferable to a lender reviewing a credit card application, with anything below 30% still generally acceptable and considered responsible credit behavior.
