The 30% Credit Utilization "Rule" is Driving People Crazy
The 30% credit utilization rule is one of the most widely repeated pieces of credit advice, yet it's also one of the most misunderstood and often unnecessary recommendations.
Search "credit card utilization" and virtually every result advises "keep it under 30%." Financial websites, credit bureaus, and credit educators all repeat this same threshold. However, what many don't explain is that for most people, most of the time, obsessing over 30% is unnecessary and can sometimes be counterproductive.
When You Need to Care About Utilization
Look, I'm not saying utilization doesn't matter. There are exactly two times when you should really focus on it:
If you're carrying balances and paying interest: Obviously, if you're paying 24% APR on credit card debt, you want to pay that off as fast as possible. But in this case, your goal isn't 30% - it's 0%. Pay off the debt, period.
If you're about to apply for something big: Planning to get a mortgage or car loan in the next month or two? Then yeah, it makes sense to optimize your utilization for the best possible score. But even then, 30% isn't the magic number - you'd want to get down to around 1% using strategies like AZEO (All Zero Except One), where you let just one card report a tiny balance.
The problem is, most people aren't in either of these situations. Most people pay their cards off every month and aren't applying for major loans anytime soon. Yet they're driving themselves nuts trying to stay under 30%.
How the 30% Rule Can Hurt You
This is where it gets interesting. If you're constantly keeping your utilization super low when you don't need to, you might be shooting yourself in the foot:
Banks think you don't need credit. If you've got a $10,000 limit but never use more than $500, your bank might think, "Why did we give this person such a high limit? They clearly don't need it." Some banks have cut people's credit limits for this exact reason.
You look unprofitable. When you apply for new cards, banks want customers who'll use the card (and maybe pay some interest or fees). If your credit report shows you barely use your existing cards, they might think you won't use their card either.
You're missing out on limit increases. Banks are more likely to increase limits for people who use their credit responsibly. If you're always at 2% utilization, they might not see the need to give you more credit.
It's like getting all dressed up in a tuxedo every single day just because you might have a fancy dinner once a year. Sure, you'll look great for that dinner, but you're making your daily life unnecessarily complicated.
The Thing About Utilization That Changes Everything
Here's the secret that credit "experts" don't always mention: utilization has no memory.
Let's say your utilization spikes to 60% one month because you had to buy a new refrigerator. Your score might dip temporarily. But next month, when you pay it down to 10%, your score bounces right back. FICO doesn't sit there thinking, "Oh, remember when Sarah used 60% of her credit three months ago? Let's keep punishing her for that."
(Okay, fine, there are some newer scoring models that do look at trends over time, but even those generally reward people who pay their balances in full consistently.)
What You Should Do
For 90% of people, the right approach is stupidly simple:
- Use your credit cards for whatever you normally buy
- Let your statement close with whatever balance you have
- Pay the full statement balance before the due date
That's it. Don't stress about whether you're at 28% or 32% utilization. Don't make weird mid-cycle payments to manipulate your statement balance. Just use your cards normally and pay them off.
This approach does three important things: you avoid interest, you show the bank you use their product, and you're more likely to get credit limit increases over time (which naturally brings your utilization percentages down anyway).
The Real Talk
The 30% "rule" is lazy advice that doesn't account for your situation. It's like telling everyone to drink 8 glasses of water a day regardless of their size, activity level, or climate.
If you're carrying debt, focus on paying it off - not hitting some arbitrary percentage. If you're applying for a mortgage next month, then yeah, optimize your utilization. But if you're just living your life and paying your bills on time? Stop stressing about 30% and focus on the stuff that matters: paying on time, not maxing out your cards, and building a solid credit history over time.
Your credit score is a marathon, not a sprint. And marathoners don't spend the whole race obsessing over their heart rate every single step.
For comprehensive credit building strategies that focus on what matters, see our guide on how to build your credit. Want to learn about more credit myths that might be holding you back? Check out our credit myths overview.
About the Author: This article was written by the Build Your Credit team, consumer credit professionals with expertise in FICO scoring models and credit optimization strategies. Learn more about our expertise.
Disclaimer: The information provided is for educational purposes only. Credit score factors and their impacts vary by individual circumstances and scoring model. This is not financial advice.