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Credit utilization calculator

Credit utilisation is the balance reported on revolving credit divided by the total limit on it. $2,400 on an $8,000 limit is 30 percent, with $5,600 of headroom.

Credit utilisation

30.00%

$2,400.00 reported against $8,000.00 of revolving limit.

Balance
$2,400.00
Limit
$8,000.00
Headroom
$5,600.00
$

Usually the statement balance, not what you owe today.

$

Cards and lines of credit. Instalment loans sit outside this ratio.

The formula

U=BLU = \frac{B}{L}

BB is the reported revolving balance and LL the total revolving limit. The page prints UU in percentage points: 30, not 0.30. Instalment loans sit outside this ratio.

A ratio, not a score

Only revolving accounts count: credit cards and lines of credit, where the room refreshes as you repay. An instalment loan has a fixed balance that only falls, so it sits outside this ratio, and so does a debit card, which has no limit to be measured against.

$2,400 against $8,000 is 30 percent. Headroom is the unused room, $5,600. Models look at this two ways at once: per card, and overall. A single card near its ceiling can read badly on the per-card measure while the overall figure still looks calm.

A credit card is an unsecured loan. How heavily the line is being used is one of the few current signals a lender has. The credit utilisation explorer is the picture: drag the balance and watch the band change. This page is the formula.

The same balance on a larger limit

Keep the $2,400 balance and raise the limit to $12,000. Utilisation falls to 20 percent. Headroom is now $9,600. Nothing was repaid. The denominator moved.

Arithmetically a higher limit lowers the ratio. Whether asking for one is a good idea depends on how the issuer processes the request and on spending, which this page does not decide. The ratio has no memory in the models that use it: it is recomputed from whatever was last reported.

Zero is a reported zero

A $0 balance on the same $8,000 limit is 0 percent utilisation. That is not what paying in full each month automatically produces. Most issuers report the statement balance. If the statement closed with $2,400 on it, that is the figure on the file, even if you cleared it before the due date and paid no interest.

Paying before the statement closes, rather than before the due date, is what changes the reported number. How credit scores work is the surrounding picture. This page only divides two numbers.

What this page is not doing

It is not a score simulator. Scoring models are commercial products, the weights inside them are not published, and the same ratio produces a different result on a different file. A tool that answers with a points gain has invented the figure.

Thirty percent is a rule of thumb in consumer guidance, not a line published in any model. Treat it as a marker to steer under rather than a gate that opens at 29 and closes at 31. This is educational material, not financial advice, and it describes United States style revolving credit.

Worked examples

\$2,400 on an \$8,000 limit

The reported revolving balance is $2,400. The total limit is $8,000. What is utilisation, and what is headroom?

  1. Utilisation is balance over limit: 2400/8000=0.302400 / 8000 = 0.30, which is 30 percent.
  2. Headroom is limit minus balance: 8000−2400=56008000 - 2400 = 5600, so $5,600.

Utilisation is 30 percent. Headroom is $5,600.

The same balance on \$12,000 of limit

Keep the $2,400 balance. Raise the limit to $12,000. What happens to the ratio?

  1. Utilisation: 2400/12000=0.202400 / 12000 = 0.20, which is 20 percent.
  2. Headroom: 12000−2400=960012000 - 2400 = 9600, so $9,600.

Utilisation falls to 20 percent. Headroom is $9,600. Nothing was repaid.

A reported zero

The reported balance is $0 on an $8,000 limit. What is utilisation?

  1. Utilisation: 0/8000=00 / 8000 = 0, which is 0 percent.
  2. Headroom is the full $8,000.

Utilisation is 0 percent. Headroom is $8,000. That is a reported zero, not a promise that paying in full produced one.

The mistake that costs the most

Reading 30 percent as a published threshold, or assuming that paying in full each month reports as zero.

Issuers normally report the statement balance. A card that is settled every month can still show $2,400 of utilisation if that is what the statement closed with. The due date is not the reporting date.

Thirty percent is a round number people repeat. The models that use this ratio do not publish a step at 30.

Common questions

Does a car loan count?

No. Utilisation is a revolving-credit ratio. An instalment loan has a fixed balance that only falls, so it sits outside this division. Card balances and credit lines sit inside it.

Does a higher limit always help?

It lowers the ratio for a given balance. Whether asking for a higher limit is a good idea depends on the issuer and on spending. This page is educational material, not financial advice.

Why is there a drag tool as well?

The explorer is the picture: move the balance and watch the band. This page is the formula, the worked steps, and the mistake of treating the statement date as the due date.

Keep reading

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.