If you live in the U.S., you know how much a credit score can impact your day-to-day life. Instead of leaving your credit score to chance, it’s important to learn everything you can about how to best work towards a stellar credit score. From on-time payments to account history, there are several factors that go into your credit score. Let’s look a little deeper into your credit utilization and how it impacts your credit score:

What it’s all about

What is credit utilization exactly? It’s the amount of your credit that is being used, and not just what’s being used on your credit card. Perhaps you have a loan open as well or a few credit cards. The amount being used over the span of your open credit accounts is what will make up your credit utilization.

For those who are seeking to keep their credit score high and use low, you will want to pay attention to your credit utilization. There are many ways to stay on top of your credit utilization, and one of the best ways is through credit monitoring.

Avoiding high utilization

If you want to get the best credit score possible, you need to keep your usage low. While many people will take their credit card and use it up to the limit they are offered, the best practice is to keep your credit use low. Lenders don’t want to approve individuals who seemingly spend whenever and wherever they can. Instead, look at your available limit as something that isn’t real.

While yes, you could use as much as what’s provided, you won’t want to when you remember what this means down the road. Credit debt and a poor credit score could be a byproduct of using too much of your available limit.

Best practices

If you haven’t been on your credit score journey for long, it’s best to learn the top practices to keep your utilization low. A few things you can do to avoid overspending is to track your spending, use different cards for must-pay expenses, and budget your money.

Keeping track of your money is one of the best things you can do when striving to build healthy financial habits. Start your month with a budget. Allow for some unexpected spending but put a limit on it. Know where your money is going and how you will pay off credit card debt. Avoiding high utilization has a lot to do with planning ahead.

Damage caused by high utilization

If you spend too much of your available credit, you’ll be doing more than just making your credit score go down. You’ll also end up in more debt, which could be hard to get out of if you’re not careful. Higher credit utilization means that those bills you have to pay every month will be higher as well. Is it worth it to spend more on your credit card or get a larger loan? Probably not.

Support for credit card addiction

If you find it challenging to stop spending money on your credit card, you may need some help from a professional. Look for support by talking to a counselor or therapist who can help you navigate your addiction to spending. Credit card use isn’t always just about not making enough money. Sometimes our financial habits are rooted in something else, so if you’ve been trying to clean up your credit score and haven’t been able to, it could be time to get some support from a professional.

Final Words

Learn to spend less and treat your credit like something that you can use at times but not go overboard with. Take it easy with credit card spending and seek to use it only at times when you really need to. Building up credit takes discipline so learn to manage your credit utilization well for a better credit score.

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