Chip Lupo, Credit Card Writer
@CLoop
You should use less than 30% of a $400 credit card limit each month in order to avoid damage to your credit score. Having a balance of $120 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.
If you want to go beyond just avoiding credit score damage and instead improve your credit score as quickly as possible, the best way to do that is to charge around 1% to 10% of your credit limit each month, then pay it off in full by the due date.
How Much of a $400 Credit Card You Should Use
- Rule of thumb: Less than $120 (30% of credit limit)
- Ideal usage: $4 to $40 (1% to 10% of credit limit)
- Safest option: You can use 0% of your credit limit and still have it improve your credit score. Your score will improve more slowly than it would if you charged a small amount each month and paid the bill in full by the due date, though.
Regardless of how much you use your credit card in a month, what really matters is how much of your credit limit is still available when your monthly statement closes, as that’s when the card’s issuer reports your balance to the credit bureaus. The balance divided by your credit limit then multiplied by 100 is your utilization percentage. Your credit score will take into account both your utilization on each credit account and your overall utilization between all your credit accounts.
Once you receive your credit card statement each month, it’s best for your credit score if you pay your full remaining balance on time and in full, if possible. This will help keep your utilization low the next month.
To get graded on your credit utilization as well as receive personalized advice on how to improve, you can join WalletHub for free and check out the Credit Analysis portion of your account.
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