The best ways to lower credit utilization to an acceptable level include several effective strategies:
- Pay down credit card balances frequently and early : Instead of waiting for the due date, making multiple payments within the billing cycle reduces the reported balance and lowers utilization. Treating the credit card like a debit card by paying off purchases as they occur helps keep balances low.
- Request a credit limit increase : Increasing the credit limit on existing cards lowers credit utilization as the utilization ratio is balance divided by credit limit. This is effective if spending does not increase.
- Use multiple credit cards strategically : Spreading expenses across several cards avoids maxing out any one card, keeping individual card utilization low, and improving overall utilization.
- Keep older credit card accounts open : Closing accounts reduces available credit, which can increase utilization, so keeping accounts open (especially those with no fees) helps maintain a higher credit limit.
- Open a new credit card thoughtfully : Adding a new card raises available credit, thus reducing utilization ratios, but should be done cautiously due to possible minor credit score impacts from hard inquiries.
- Pay down high-interest debt strategically : Focus on paying off high-interest credit card debt first to reduce balances quickly.
Aim to keep credit utilization ideally below 10% for the best credit score impact, though below 30% is generally considered acceptable.
