What happens if I use 80% of my credit?

The Impact of High Credit Utilization on Your Credit Score

Using a significant portion of your available credit can temporarily affect your credit score, but it’s not a permanent stain on your credit history. Understanding how credit utilization works can help you maintain a healthy credit profile.

Credit utilization, simply put, is the percentage of your available credit that you’re currently using. A common misconception is that high utilization carries over month to month, impacting your score consistently. This isn’t the case. Each month, your credit utilization is calculated based on the information from your current credit report. Using 80% of your available credit in one month might temporarily lower your score, but this impact is not cumulative.

Crucially, paying your credit card balance in full before the statement closing date eliminates any negative impact from high utilization. This is because the calculation for utilization only considers the outstanding balance during that specific billing cycle. If you pay your full balance, your utilization rate drops to zero for that month’s calculation.

It’s also important to note that your credit history doesn’t have a “memory” when it comes to credit utilization. While a single instance of high utilization might temporarily affect your score, previous high usage will not negatively affect your future credit scores. Your credit report focuses on your recent activity, not your past mistakes.

So, while it’s advisable to keep your credit utilization low—ideally below 30%—a single instance of higher utilization won’t permanently harm your credit score. The key is to pay your balances in full each month to prevent any negative impact on your creditworthiness. By understanding this temporary nature of credit utilization, you can manage your credit effectively and ensure a positive credit history.