Build Credit: The 30% Rule – Making Sense of Utilization Rates

Why would you want MORE credit cards with lower limits?

The percentage of your available credit that you’re using is called your credit utilization rate. For instance, if your limit is $1,000 and your balance is $430, your utilization rate is 43%.

Credit bureaus weigh this number heavily when calculating your score. The lower the rate, the better. The sweet spot is keeping utilization under 30%. This is often called the 30% rule. Using the earlier example, if your credit limit is $1,000, you don’t want your balance to go over $300.

If your current cards don’t give you enough room, check out this list of credit cards currently approving our clients. Opening new credit cards can help you expand your available credit while reporting positive payments each month.

What if you pay your bills on time each month?

On-time payments are important, but they don’t tell the whole story. Lenders also want to know if you live within your means, and utilization is how they measure it. Even if you pay off your balance in full every month, letting it climb above 30% before the statement closes can hurt your score.

What if you don’t have a preset limit?

Some cards, like certain American Express products, don’t have a traditional spending limit. In that case, the credit bureau looks at the highest balance you’ve ever charged and uses that as your “limit.” If your highest balance was $8,000, the 30% rule means you shouldn’t let your balance rise above $2,400.

What should you do if you currently exceed the 30% rule?

If your balance is above the 30% mark, you have a few options:

• Pay down your balance until you’re under the threshold.
• Spread your balance across multiple cards to keep each one below 30%.
• Ask your issuer for a credit limit increase (just confirm it’s reported to the bureaus).
• If you have fewer than five cards, consider opening a new one to give yourself more available credit.

 Want to see which cards give you a fast path back to the 700s? Visit our credit card offers page for a full list of secured and unsecured cards that report to all three bureaus.

Frequently Asked Questions

1. Does opening a new credit card really help lower utilization?
2. How many credit cards should I have to follow the 30% rule?
3. Can a secured credit card really improve my utilization ratio?
4. What if my only card has a very low limit?
5. Is utilization calculated per card or across all accounts?
6. Where can I find credit cards that report to all three bureaus?

FAQ: Does opening a new credit card really help lower utilization?

Yes. Opening a new credit card helps lower utilization because it increases your total available credit, making your balances a smaller percentage of your overall limit. For example, if you owe $1,000 and have $2,000 in available credit, your utilization is 50%. If you open another card with a $2,000 limit, your utilization instantly drops to 25%, without paying down a single dollar.

 That said, there are short-term trade-offs. A new account typically triggers a hard inquiry and lowers the average age of your credit, which can cause a small dip in your score. The good news is that this dip usually lasts only a few months. By the six-month mark, the benefits of lower utilization and on-time payments often outweigh the temporary loss of points.

 The important thing is that the new account reports to all three credit bureaus and is managed responsibly. If you let balances creep above 30% on the new card, the benefit disappears. If your current cards don’t give you enough room, check out this list of credit cards currently approving our clients.

 Key takeaway: Adding a new credit card and keeping the balance below 30% is one of the fastest ways to reduce utilization and improve your credit score.

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FAQ: How many credit cards should I have to follow the 30% rule?

Most people see better results with three credit cards, because spreading balances across multiple accounts keeps each utilization ratio low. With only one or two cards, even small charges can push you over 30%, making your score look riskier to lenders.

The “right” number of cards really comes down to how you spend and whether you pay on time. If you take on more accounts than you can keep up with, it can backfire. But having fewer than three cards may hold you back. Adding another account, even a secured card, can give you more room to breathe and help build a stronger payment history.

Key takeaway: Most people do best with three to five credit cards. That’s the sweet spot for keeping utilization low and boosting your score. If you don’t have that many yet, it may be time to check out some new card offers that match your credit profile.

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FAQ: Can a secured credit card really improve my utilization ratio?

Yes. A secured credit card counts toward your total available credit the same way an unsecured card does, even though it requires a deposit. Many people start with secured cards after bankruptcy or a financial hardship because they’re easier to qualify for. When used properly (i.e., keeping balances below 30% and paying on time every month) they build both utilization and payment history.

Over time, issuers often convert secured cards into unsecured ones, raising your limit and giving you more room to manage utilization. Here is a list of secured and traditional credit cards that are currently approving our clients.

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FAQ: What if my only card has a very low limit?

If you have a very low limit on your only credit card, you need to follow the 30% rule and open new credit cards. Imagine, for instance, that your only card has a $500 limit. Even a $200 balance puts you over the 30% rule. That means you will be penalized by the scoring system even if you pay the card in full each month.

The solution is to pay your balances down before the statement closes, request a limit increase, and open at least two new credit cards.

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FAQ: Is utilization calculated per card or across all accounts?

Utilization is calculated in both ways: 1) per card and 2) across all your revolving accounts. Lenders look at whether each individual card is managed responsibly, but they also want to see that your overall balances stay under 30%. One maxed-out card can raise red flags and lower your credit score, even if you other behavior is spot-on.

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FAQ: Where can I find credit cards that report to all three bureaus?

Not all credit cards report to all three bureaus, which is critical when you’re trying to follow the 30% rule. If a card only reports to one or two, your score might not improve as quickly as you expect.

The good news is that we’ve gathered a list of cards that are consistently reporting to Experian, Equifax, and TransUnion, and that are currently approving our clients, even those with less-than-perfect credit.

 These cards give you the best chance to expand your available credit while building a solid payment history that shows up everywhere lenders look.

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