Now let’s change it up a bit.
We’re going to leave Credit Card A alone, but we’re going to change Credit Card B and imagine the total credit limit from is only $2000. However the balance will remain unchanged at $1500.
So now, on credit card B, you are using $1500 of your available $2000 and your credit utilization on this card is 75%.
Banks do not like this number.
On Credit Card A you are still using $1500 of $5000 so this remains at 30% utilization.
Combined the two credit cards have a total available limit of $7000 ($5000 + $2000) and the total combined balance is $3000 ($1500+$1500) so your credit utilization between these two cards is approximately 43%.
How do we arrive at this number?
$3000 / $7000 = 0.42857 or rounded up to 0.43 is 43%. Not as bad but still affecting your credit score. Room for improvement, shall we say.
So you can either pay off some of the balance of Credit Card B to lower your utilization or on the flip side raise the limit of Credit Card B and effectively create the same outcome.
If you ask the bank issuer of Credit Card B for a credit raise of $3000 and they approve it, you will have taken your combined utilization from 43% to 30% and your single card utilization on Credit Card B, from 75% to 30%.
Not bad for a days work!
The goal here is to get your balance to be 30% of your total available credit and from the perspective of the banks it makes sense.
You still need to be responsible with your credit allowances and combining that with some savviness and know-how can go a long way towards your future.