Forget the old 30 percent Credit Utilization Rule!

Start by throwing out the old notion about 30 percent usage being OK. FICO, the company that originated credit scoring and is still the largest provider of such scores, has long advised score-conscious consumers to be far more stingy about credit use. The company had told people to keep it to 10 percent or less, says Anthony Sprauve, spokesman for myFico.com, FICO’s consumer website.

More recently, the company’s stance has softened he says. Its studies indicate that there is only a minimal score difference between consumers who limit their usage to less than 20 percent and those who keep it to less than 10 percent, he says.

That can be good news for consumers who want to actually use lower-limit credit cards for more than token purchases.

According to FICO surveys, credit scoring “high achievers — those with a score north of 750 — they’re using an average of 7 percent of their available credit,” Sprauve says. “I think 20 percent, for a lot of people, is more realistic. I would rather talk about that as a realistic goal that they can attain, rather than something that might feel like a stretch and out of reach.”

And remember that credit scoring formulas are closer to a sliding scale than a cliff. You don’t go from a great score at 20 percent credit utilization to a lousy one at 21 percent. “There’s no hard-and-fast guideline,” Sprauve says. “But I think that if people stay somewhere between 10 and 20 percent range, that’s a good place to be.”

It’s still true that you shouldn’t go rack up debt on any one card. The FICO scoring system looks at “the total available credit and the total balance used,” says Sprauve. “But it also does look at individual lines of credit. So it factors in both.”

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