How to Lower Your Credit Utilization in 2026

Oct 9, 2025

WalletHub Managing Editor

Fact checkedFact Checked by Alina Comoreanu, WalletHub Senior Researcher

WalletHub Senior Researcher

You can improve your credit utilization by decreasing your debts, reducing your spending, and increasing your credit limit. Credit utilization is the percentage of your credit limit that you use each month, and it’s a critical component of your credit score.

Most creditors prefer applicants who use only a portion of their allotted credit lines because it reflects reasonable spending habits, and such individuals are statistically more likely to pay their bills on time in the future. If you need help keeping your credit utilization down, you should follow the tips below.

7 Ways to Improve Your Credit Utilization

Pay Off Purchases Quickly
Pay More Than the Minimum Required on Your Debt
Eliminate Unnecessary Spending
Open a New Credit Card to Increase Your Total Available Credit
Ask for a Higher Limit or Add to Your Deposit
Transfer Balances to Get a Lower Rate
Don’t Close Credit Card Accounts

Pay Off Purchases Quickly

Your creditor does not send your daily balance to the credit bureaus. Instead, they send the balance you have at the end of your billing cycle, which is the same balance that appears on your monthly statement. Your credit utilization is calculated using your statement balance, so if you pay off part of your balance before the end of the billing cycle, your credit utilization will be lower.

Pay More Than the Minimum Required on Your Debt

Making the minimum payment listed on your monthly bill by the due date is all that’s required to keep your account in good standing. But if you only make the minimum payment (or otherwise pay less than the full statement balance), the unpaid balance will accrue interest. That interest will get added to the total balance you have to pay back, increasing your credit utilization. However, paying more than the minimum required on your credit cards can quickly bring down both your balance and your credit utilization.

If you have multiple credit card balances, some people suggest paying off your smallest balance first, as it will provide a sense of achievement and bring the utilization on one of your accounts to zero. But we recommend focusing on the balance with the highest interest rate (while paying the required minimum on the rest) because it is the most expensive.

However you decide to approach the problem, you’ll need to allocate more of your monthly budget to debt payments than you currently do in order to change the utilization math. WalletHub’s credit card payoff calculator can help you find the fastest and cheapest way to become debt-free.

Eliminate Unnecessary Spending

Expenses that once were considered luxuries can easily become necessities in our minds due to simple habit, if nothing else. Habits are hard to break, of course, but something has to go if you’re serious about reducing utilization. Your job is to decide what.

So, look over your recent credit card statements, make a list of what you’re spending money on, and rank these expenses in order of priority. Afterward, commit to cutting a few of the lowest-priority expenses that you can live without.

A WalletHub account offers many tools that can help you make a budget and track your expenses. For example, you can sync your financial accounts to automatically track your spending, choose from five different budgeting methods, and get access to a subscription manager to see all your recurring charges in one list. In addition, WalletHub will analyze your spending and recommend more ways you can save money.

Open a New Credit Card to Increase Your Total Available Credit

Adding available credit without increasing your spending will help reduce your overall credit utilization. The best tool for the job is a credit card with no annual fee because you can keep it open for a long time without worrying about the cost.

Keep in mind, however, that applying for and opening a new credit card account can have a temporarily negative impact on your credit score, which means it’s not advisable if you have an important financial event on your calendar in the next six months.

Ask for a Higher Limit or Add to Your Deposit

You can reduce utilization on an existing credit card account by requesting a credit limit increase or by adding to your deposit if you have a secured card. While the latter won’t harm your credit score in the short term, impacting only how much cash you have in the bank, the former will likely result in a hard inquiry.

Transfer Balances to Get a Lower Rate

If your credit card debt is currently accruing interest at a high rate and you have an above-average credit score, transferring at least part of what you owe to a new credit card with a low or 0% interest rate could be immediately beneficial to your individual account utilization. If you use the savings derived from this balance transfer to pay down your principal at a faster rate, this strategy will ultimately prove helpful to your overall utilization, too.

Check out WalletHub picks for the best balance transfer credit cards to see the offers that can save you the most money.

Don’t Close Credit Card Accounts

When you close old, unused credit card accounts, you lower the amount of available credit you have and negatively affect your credit utilization. As long as the card doesn’t have an annual fee, you can keep the credit card account open and locked away in a drawer to benefit your credit score. However, if it has an annual fee, it may be worth contacting your credit card issuer to see if they can downgrade your card to one without a fee.

Key Things to Remember About Credit Utilization

Keeping credit utilization down is easier said than done. This is especially true if you’re working with incomplete or inaccurate information. It’s therefore important that we clarify a few things about credit utilization.

Only certain accounts are included. Credit utilization takes into account only the balances and limits on your credit cards and standard lines of credit. Most credit scoring formulas no longer include HELOCs in credit utilization calculations. Installment loans with set payments, such as mortgages and car loans, for example, are not included either.
Account utilization & overall utilization both matter. Credit utilization is calculated for each of your accounts individually by dividing your monthly statement balance by your credit limit as well as for all of your accounts together. Both types of utilization play a role in credit scoring, but overall utilization tends to be most important.
Below 30% is the golden rule. It’s generally recommended that consumers keep their credit utilization below 30%, though the lower you can get it the better. A low credit utilization shows creditors that you can manage your debt responsibly.
0% credit utilization is not optimal. While maintaining zero utilization is certainly better than maxing out your credit cards, swearing off credit entirely doesn’t necessarily create confidence among potential lenders. Question marks will still remain regarding how you might ultimately leverage the credit made available to you, should the circumstances ever demand it. The best approach is to make sure you are using at least one card each month and paying off the balance in full when the statement comes.
Everything is relative. Not everyone is evaluated according to the same utilization scale. What matters most is how your utilization compares with that of other individuals who are approximately your age and have similar financial profiles in terms of factors such as income and debt obligations.

Tips for Setting Credit Utilization Goals

You may have heard that credit utilization only matters when it comes time to apply for a credit card or loan, and that’s partially true. Credit utilization is only calculated in the course of tabulating your credit score, and that’s most often done in response to an application for the ability to borrow money. But you can also use credit utilization as an indicator of your own financial stability or to evaluate the progress of budgeting efforts, for instance.

Evaluate Your Starting Point

Consider not only your current utilization but also the overall state of your finances. Are you in debt? Or do you pay your bills in full every month and have high utilization simply because your credit limits are pretty low? Asking yourself such questions will help put utilization into context and will assist you in establishing financial priorities.

Make sure to also take your current credit score into account because it will give you a sense of how impactful reducing your credit utilization might be. For example, if your score is right on the edge of a given credit level (i.e., excellent, good, fair, limited, and bad), utilization improvements could provide the boost necessary to either solidify your status or reach a higher classification.

Chart the Course of Your Immediate Financial Future

Foresight is critical to any utilization improvement effort, as even a rough understanding of when you plan to purchase a home or buy a car, for instance, will help you establish a timeline. That’s important because the very things that can help you improve your credit utilization in the long run – such as opening a new credit card – often are detrimental to your overall credit standing in the short term. You therefore want to limit surprises as much as possible.

Establish a Timeline & Set Incremental Goals

With a solid understanding of where your finances are now and what awaits them in the future, you’ll be able to set an overall time-based goal. For example, you might wish to reduce your overall credit utilization from 50% to 30% in the next 24 months because you plan to start shopping for a mortgage around then. Or maybe you want to reduce your utilization on one particular account from 30% to 15% within a calendar year as part of a larger goal to create an emergency fund.

The specifics are up to you, but just make sure to confirm your plan is realistic. Think about what you’ll need to do on a daily, weekly, and monthly basis to achieve your overall goal. Then establish checkpoints at regular intervals so you can check whether you’re on pace and make adjustments as necessary.

Bottom Line

At the end of the day, there’s no real secret to credit utilization, and you shouldn’t try to game the credit-scoring system. Rely instead on the fundamentals, such as budgeting, saving, and avoiding unnecessary debt, and both your utilization and your finances in general ultimately will be healthy.

It’s also important to note that credit utilization is something that’s always good to keep an eye on, but you shouldn’t get too hung up on your specific utilization grade unless you have a significant financial event in your immediate future. Applying for a mortgage is a good example.

To learn more, check out WalletHub’s credit utilization and budgeting guides.

FAQ About How to Improve Credit Utilization(23 questions)

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Upvotes

Does closing a credit card hurt your credit?

Mary Grace McCormick, Credit Writer

Yes, closing a credit card does hurt your credit score in the short term, depending on how old the accounts are and how much other credit you have. But canceling a credit card account might also benefit your credit score in the long run if you manage the rest of your finances better as a result of having one fewer account to worry about.

You can estimate the effect of canceling a credit card on your credit score by using our credit score simulator. You can also check your latest credit score for free on WalletHub. You'll get daily updates as well as personalized advice.

Here's what happens to your credit score when you cancel a credit card:

Credit score drops: Your credit score often goes down because the average age of your open accounts decreases and your overall utilization increases (since you have less available credit).
Scores bounce back: Your credit score should rebound within 3-6 months of canceling your credit card account. Make sure to have at least one open credit card remaining and pay all your bills on time.
What happens if you don't cancel: A credit card that is in good standing will continue to help your credit score. Even if you don't make purchases with it, it will still report positive information to the credit bureaus each month. This is definitely worth considering if your card does not charge an annual fee.
Age matters: Closing newer accounts won't have as much of an impact as closing older ones.
Limit matters: Closing low-limit accounts won't do as much damage as closing high-limit ones.
When score drops matter: If you don't need the best score possible for the 3-6 months it usually takes credit scores to bounce back after credit card cancelation, the temporary drop shouldn't cost you anything.

Bottom Line: Avoid canceling your oldest card and your card with the highest credit limit. That will mitigate the amount of credit score damage. And if you have to close your oldest or highest-limit card, make sure you do it at a time when you don't need your credit score to be at its best.

View more answers

Upvotes

What happens if you dont use your credit card?

WalletHub

Nothing is likely to happen if you don't use your credit card for a few months. In fact, stopping with a $0 balance could actually help your credit score, despite the myth that keeping a small balance is better. Over a longer period, some rewards may expire and accounts could be closed, but you won't be charged any fees for inactivity.

As a result, not using your credit card (at least not regularly) can...

Upvotes

Is it better to cancel unused credit cards or keep them?

Milvionne Chery Copeland, Writer

It is better to keep unused credit cards open than to cancel them because even unused credit cards with a $0 balance will still report positive information to the credit bureaus each month. It is especially worthwhile to keep an unused credit card open when the account does not have an annual fee.

Still, there are times when it may be beneficial to close your credit cards, such as to avoid expensive annual fees. And...

Upvote

What does it mean to downgrade a credit card?

John Miller, Credit Cards Moderator

Downgrading a credit card refers to switching from your current credit card to a lower-tier version offered by the same card issuer. This process allows you to retain your account while reducing or eliminating annual fees and other costs associated with the higher-tier card.

Getting a credit card downgrade can also make sense for individuals whose spending habits or lifestyle no longer align with the benefits offered by their current card. For example, if a...

Upvotes

Is it better to pay off your credit card or keep a balance?

WalletHub

It's better to pay off your credit card than to keep a balance because paying the card off will save you money on interest. Credit card companies charge interest when you don't pay your bill in full every month, but you'll enjoy a grace period with no interest if you always pay your full statement balance by the due date.

Some people think you need to carry a balance in order to see positive information...

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Upvotes

Does paying the minimum hurt my credit score?

Christie Matherne, Credit Card Writer

No, making just the minimum payment on a credit card does not hurt your credit score. Making your minimum payment on time actually does the opposite, as positive information is reported to the credit bureaus every month you do that. The exact amount you pay doesn't factor into the payment history portion of your credit score. It's simply noted that you've made a payment on time.

Although there's no direct connection, only paying the minimum amount...

Upvotes

Should I pay more than the minimum on my credit card?

Chip Lupo, Credit Card Writer

Yes, you should pay more than the minimum on your credit card. While paying the minimum amount due on time every month will keep your account current, paying more than the minimum each month will save you money on interest, improve your credit score, and reduce the amount of time it will take to pay off your debt.

Why You Should Pay More Than the Minimum on a Credit Card

You'll Pay Less...

Upvotes

Should I pay off my credit card every week?

Theresa Chalfant, Writer

You should pay off your credit card every week if you find that the extra payments make it easier to keep your statement balance low. Credit card issuers report information to the credit bureaus when your statement period ends, so making extra payments to have a low balance at that point could help improve your credit. However, you only need to pay once per month.

When You Should Pay Off Your Credit Card Every...

Upvotes

Should I pay off my credit card multiple times a month?

John Miller, Credit Cards Moderator

No, you don't have to pay off your credit card multiple times a month. Making at least the minimum payment by the due date will keep the account in good standing. However, making multiple credit card payments in a month can be good in certain situations.

Why Paying a Credit Card Multiple Times a Month Can Be Good

Reduces Credit Utilization: Credit card companies typically report your account information to the bureaus at the end...

Upvotes

Do I have to pay the current balance or statement balance?

Chip Lupo, Credit Card Writer

A credit card's statement balance is what you owe at the end of a billing cycle, while the current balance is how much you owe on your card at any given time. To avoid interest charges, pay your statement balance in full by the due date monthly – there's no need to pay your entire current balance in most cases.

That said, it's important to understand the differences between these two amounts, and when...

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