John Miller, Credit Cards Moderator
@john_miller
No, it is not okay to use 40% of a credit card because it can negatively affect your credit score. It is recommended that you keep your credit utilization ratio below 30% in order for it to have a positive impact on your credit score and signal to other lenders that you can manage debt responsibly.
However, please note that while credit utilization is an important factor in determining your credit score, it is only one variable among many. As a result, it is difficult to pinpoint exactly what impact will a 40% utilization have on your credit score. For example, if you have other credit cards with a low utilization rate and are making on-time payments, a 40% credit utilization shouldn’t bother you much. But if you have only one credit card and a 40% utilization, it may spell some trouble.
One important thing to remember is that credit card companies report to credit bureaus on the statement closing date. So, if you have a high utilization rate, as long as you can bring your balance down before the billing cycle ends you should be able to mitigate any negative impact to your credit. You can refer to WalletHub's guide on credit utilization if you wish to learn more about how much of your credit limit you should use.
People also ask
What's the best credit utilization ratio?
The best credit utilization ratio is 1% to 10%. A good credit utilization ratio is anything below 30%. These percentages reflect a credit card user’s statement balance divided by the account’s credit limit, with the product multiplied by 100.
On a credit card with a $1,000 limit, for example, it would be best to use $10 to $100 each month, and no more than $300. Using any more than 30% of your available credit risks...
read full answer by WalletHub, Financial CompanyShould I use 100% of my credit limit?
No, you shouldn’t use 100% of your credit limit for multiple reasons, including damage to your credit score and higher interest charges. As a rule of thumb, you should not exceed a 30% credit utilization ratio. This practice can allow you to improve your credit score while demonstrating to other lenders that you are using credit responsibly.
Why You Shouldn’t Use 100% of Your Credit Limit
- It Can Lower Your Credit Score: Using all of your available credit limit can...
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