This piece is part of my 2016–2026 archive migration. Some original formatting, content, and external links may be missing, changed, or not be optimized.
The penalty and the reward
Don’t utilize 50% of your credit limit if you don’t have the money to pay it back and don’t need to spend x dollars.
The Experiment
99% of the time, I pay off my credit card statements in full. The only time I didn’t is because I forgot.
If you have issues forgetting to make your credit card payments, I highly recommend you set up automatic payments. Thankfully, I have automatic payments set up now.
I decided to leverage 50% of my credit card limit to learn how it would affect my credit score, and here’s what happened:
Credit score dropped by 50 points.
My credit profile is in good standing, so I was shocked that a one-time utilization of 50% would affect it that much.
What Happened After I Paid My Balance Off
Once the following statement cycle rolled around, I paid my balance back to zero, and my credit score rose to 50%.
So we can conclude that credit utilization is a significant factor. Though this 50% increase was less than 30% of my total credit utilization (add up the credit card limits across all of your credit cards), it traumatized and shook my credit profile.
Credit Card Utilization Is Critical
Credit card utilization (the percentage of your credit card limit that you use) is the most impactful factor to your credit score outside of having delinquent accounts.
The max credit limit some people have is $500-$1000 because their credit profile is damaged from delinquent accounts or repeated high credit utilization.
Credit card companies and credit bureaus will punish you if you frequently leave more than 30% of your credit limit for your statement balances. I’ve also seen my credit score negatively affected by 30% utilization, even when it was rare.
The sweet spot for credit card utilization is 10%. Companies tend to penalize you a lot less, and disregard this level of usage.
If you can use a credit card responsibly, then this is how to do it in the next section…
The Best Way To Use A Credit Card
Take a 30-day interest-free loan, and pay it back before your statement balance is due.
Many people get in trouble with credit cards because they don’t pay back the amount of money they utilize.
Rule To Follow
Whatever amount of money you use on your credit card, have it ready before your 30 days are up that way, you’re never accumulating debt, paying interest, and wrecking your credit profile.
Credit cards are a gift. If you use them well, you will reap the rewards.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.