Credit Utilization Mastery

What is Credit Utilization?

Credit utilization is the percentage of available credit you're using. It's calculated as:

Utilization accounts for 30% of your FICO score — the second most important factor after payment history. It's also the fastest factor to change, since unlike payment history, it resets every month.

There are two types of utilization the algorithm considers:

• Per-card utilization — each individual card's balance vs. its limit
• Aggregate utilization — total balances across all cards vs. total limits

The 30% Rule is a Myth

You've probably heard "keep utilization under 30%." That's damage control, not optimization.

The 30% threshold is where penalties start getting worse. It's not where you score highest. Here's what actually happens:

Here's the data: People with FICO scores of 800+ have an average utilization of just 4.1%. The algorithm rewards minimal usage, not 30%.

The AZEO Method (All Zero Except One)

The AZEO method is a scoring optimization strategy confirmed by FICO research. Here's how it works:

Why Not 0% on Everything?

If ALL your cards report $0 balance, the algorithm often applies a "non-usage" penalty — typically 12-20 points. It interprets zero activity as a dormant profile with no recent data.

By leaving one card with a small balance, you show active credit management while keeping utilization minimal.

Statement Date vs. Due Date: Critical Timing

This is where most people mess up. There are two important dates on every credit card:

The Correct Strategy

1. Find your statement closing date (in your online account or on your statement)
2. Pay down to your target balance 3-5 days before the statement closes
3. Let the statement generate with the low balance
4. Pay the remaining balance by the due date to avoid interest

Utilization Has No Memory (In FICO 8)

This is the best news about utilization: under FICO 8, it completely resets each month.

You could have 90% utilization this month, pay it all off, and next month your score bounces back as if it never happened. The algorithm only looks at the current snapshot, not your history.

This is why utilization is the fastest lever for improving your score. You can gain 20-50+ points in a single billing cycle by paying down balances.

FICO 10T: The Exception

FICO 10T and VantageScore 4.0 introduce "trended data" — they look at 24 months of balance patterns, not just the current snapshot.

These models distinguish between:

• "Transactors" — people who pay in full each month (rewarded)
• "Revolvers" — people who carry balances (penalized)

Increasing Your Credit Limits

Another way to lower utilization is to increase your limits without increasing spending.

Many issuers offer soft-pull credit limit increases — they don't affect your score:

Your Action Plan