How Much Available Credit Should I Have?

How much available credit you should have varies by person and their related expenses. So while Benzinga can’t provide a dollar amount, the best rule of thumb is to only use 30% of your available credit. If you need to charge $3,000 per month to your credit card, get a card with a $10,000 limit.

Using credit responsibly means never charging more than you can pay off in a month. Ensuring 30% or less credit utilization and timely payments will work wonders for building or maintaining your credit score. Learn more about smart ways of managing your available credit.

How Much Available Credit Should You Have?

Your credit score is closely tied to the percentage of your available credit you use on a rolling basis. When applying for credit cards, you should take as much credit as the company is willing to offer you. That way, you have plenty of wiggle room in keeping expenses below 30% of your total credit limit.

If one company won’t offer you adequate credit to meet your monthly expenses, you might consider having multiple cards. For example, if you need $3,000 in credit to charge your expenses and can pay it off each month with no issues but a credit card company will only give you $5,000, you might open another $5,000 limit credit card and split your expenses across the two.

The only way this can harm your credit is if you are carrying debt on your cards. You want to avoid doing so as the debt will count toward your credit utilization, which can add up quickly as the credit card company starts charging you interest.

The term “available credit” refers to how much money you have left to spend based on your credit limit and your current balance on the account. If your credit limit is $10,000 and you have a balance of $2,000 on your account, your available credit is $8,000. 

To determine the amount of credit you need, add up the expenses that you would charge to a card to review your budget. Or take a look at your expense tracker for more details. That total should be no more than 30% of your total credit limit. You might want to aim for 20% to make room for unexpected expenses or heavier months, such as when you go on a vacation or complete a home improvement project. During these heavier months, you can also make payments on the card more often than once a month to keep your credit utilization at a good level.

How Available Credit Impacts Your Credit Score

As you ask yourself, “How much credit should I have?”, you want to keep your credit score in mind. At all times, you want your available credit to be 70% or more, which means your credit utilization is at 30% or less.

Your credit utilization ratio is an essential element in determining your credit score. While your credit limit does not impact your credit score specifically, it will be a factor in your credit utilization, which directly impacts your credit score.

When reviewing your available credit, keep in mind that 0% credit utilization is not great for your credit either. Ideally, you want to maintain a credit utilization of around 10% to keep your credit as healthy as possible.

On the other side of the spectrum, you should not be maxing out your credit card, even if you can pay it off in full. When you max out your credit card, it means you’re using 100% of your credit. That tells lenders you are spending at high and unrealistic limits based on your income or that you aren’t managing your finances effectively.

How to Increase Your Available Credit Limit

You have many options for increasing your available credit limit. Here are some practical ways of doing this.

• Request a credit limit increase: If you haven’t done this in some time, you should ask your credit card company to increase your credit limit. That way, you can keep your credit utilization ratio low despite increasing expenses. You might need to update your income information with your credit card company so they know you can handle a higher credit limit.

• Make credit card payments throughout the month: Some months have higher expenses than others. To keep your available credit at the 70% or higher range, make payments on your credit card throughout the month. For example, you might make biweekly payments instead of monthly to help manage credit utilization.

• Pay off credit card debt: Any debt you carry from month to month will count against your available credit. Plus, you’ll pay compounding interest on this debt so it’s best to try and keep it to a minimum. If your credit card debt is large, you might consider a debt consolidation loan or getting a balance transfer credit card, which can provide you with 12 months without interest to pay off the debt. Just know that some cards have a balance transfer fee to get started.

Improve Your Credit Score By Watching Your Available Credit

Your available credit affects your credit score if it falls below 70%. Paying attention to this important metric can help you improve your credit score, which means lower interest rates on loans, more housing options when applying to rent, better insurance rates and more. Consider using the tips in this article to increase your available credit for better credit score results.

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