How you use your credit card has a huge impact on your credit score. There are of course many factors that go into your actual score but one of the easiest levers to improve your score is via your credit utilization.
Credit utilization measures the balances you owe on your credit cards relative to the cards’ credit limits. If you never use your credit cards and there’s no balance on them, your credit utilization would be zero. If you typically carry a balance on one or more cards, you are ‘utilizing’ some of your available credit—and credit score providers will take note. If your utilization ratio is high, it indicates that you may be overspending—and that can negatively impact your score.
The general rule of thumb with credit utilization is to stay below 30 percent. This applies to each individual card and your total credit utilization ratio. Anything higher than 30 percent can decrease your credit score and make lenders worry that you’re overextended and will have difficulty repaying new debt.
To see the impact, you can use the FICO simulator to see the impact of credit utilization on your score. Taking your utilization from 80% to 20% can improve your credit score by over 100 points (although this depends on your specific circumstances).