How Many Points Will Your Credit Score Drop if You Increase Your Credit Utilization?

| Tedis Baboumian |

Credit utilization is the amount of available credit you’re using on credit cards and revolving lines of credit. If you’re aiming for a good credit score, whenever possible, try to keep your credit utilization under 30 percent of the available amount. When people try to understand how credit scoring works, a common question is “How many points will your credit score drop if you increase your credit utilization?”

How Credit Utilization Affects Your Credit Score

Your FICO score is made up of a combination of factors. These factors include:

  • Payment history – Potential lenders want to see that you have a history of making payments on time, so this category makes up 35% of your FICO score.
  • Length of credit history – This category refers to the age of your newest and oldest accounts and the average age of all your accounts. It is about 15% of your FICO score.
  • Credit mix – This is worth 10% of your credit score and is the mix of different types of accounts you have.
  • New credit – If you open a lot of new accounts in a short period of time, it may be a sign that extending credit to you may be risky. This category makes up 10% of your FICO score.

The remaining 30% of your score is based on the amount you owe. The lower the amount of available credit you’re using, the better. Lenders know that if your credit utilization is high, you may begin to have difficulty paying back what you owe. If you have a major expense and your credit utilization jumps, your credit score may drop by 30 points or more.

Lowing Your Credit Utilization

If your credit utilization has spiked, start working on bringing it down. The good news is a temporary drop in your credit score caused by a jump in your credit utilization can recover as you’re able to reduce the amount you owe.

Asking for an increase in the credit limit of one of your cards may reduce your credit utilization rate. If it’s necessary to use more of your available credit for a short period of time, spread the charges out between different credit cards and try to make payments to your creditors more than once a month. Since creditors report to the credit bureaus only once a month, you may be able to avoid having an increase in your credit utilization show on your credit report.

What if the Increase in Credit Utilization Isn’t Accurate?

Sometimes people find items on their credit report that have increased their credit utilization rate, but the items aren’t accurate. You could find accounts that don’t belong to you, or someone may have used one of your credit card numbers without your permission. Dispute fraudulent items immediately. Need help with this process? Dovly is an AI credit engine that will dispute errors on your credit report for you. This process doesn’t get easier than this. Try it risk-free with our free membership tier.

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