Does Maxing Out a Credit Card Hurt Your Credit Score?

Few things are as embarrassing as having your credit card declined by a cashier in front of a line of impatient customers. But does maxing out a credit card hurt your credit score as well as your ego?

Yes, maxing out credit cards can hurt your credit score. However, the impact to your credit from a maxed-out credit card will depend on many factors. This guide explains how -- and why -- maxing out credit cards impacts your credit score.

The main problem is your utilization

Maxing out your credit card worsens your utilization ratio. Depending on the severity of the change, this could hurt your credit score.

Your utilization ratio makes up 30% of your FICO® Score. To keep your score high, you want to make sure the amount of credit you borrow is below 30% of the total credit available to you. For example, if your total credit line is $10,000, you want to use no more than $3,000.

But what if you have multiple credit cards, and therefore multiple credit limits? In that case, add up all your credit card limits to figure out your credit maximum, the total credit you can theoretically borrow.

Example: Say you have two credit cards total. Card A has a $1,000 limit. Card B has a $9,000 limit. Your credit maximum is $10,000. Between the two cards, you want to use no more than $3,000 in credit to help keep your credit utilization ratio low and your credit score high. You can max out Card A without tanking your credit score because the card's $1,000 credit limit is only 10% of your available credit.

Experts recommend keeping your utilization below 30%, but if you want to build an excellent credit score, you want to keep that number in the 5% to 10% range. It's worth noting the average American's credit score is about 714, which counts as a "good" score.

How other credit factors come into play

Maxing out a credit card will impact your credit utilization ratio. But whether the impact is tiny or huge depends on at least three other credit factors, including how many credit cards you have.

How many credit cards you have

If you have multiple credit cards, maxing one out might not impact your credit score. Credit issuers only care about how much of your total available credit you use at any one time.

Say you have four credit cards, each with a $2,500 credit limit. Your total available credit is the sum of their limits, which adds to $10,000. If you max out one card and leave the others alone, your credit utilization is 25%. That's beneath the 30% limit recommended by experts, so your credit score will probably be OK.

If you only have one credit card and max it out, you are using 100% of your credit utilization. That will probably have a large, negative impact on your credit score.

Your existing credit score

Your existing credit score matters. Generally speaking, someone with a good credit score would be punished more for "bad credit behavior" than someone with a poor score. Depending on your existing credit, your score could drop by 40 points or more.

How long it takes to pay off the balance

The longer you wait to pay off your credit card balance, the longer your balance stays high. If you only make minimum payments, you could be charged credit card interest above and beyond your credit limit. Unless you pay off the card, you could find yourself lifting a growing debt pile. If that leads to you making late payments, then your credit score could tank even further.

Is maxing out a credit card ever a good idea?

Maxing out a credit card is rarely a good financial move, but there are exceptions. If you have no other way to pay a necessary expense, such as a medical emergency, you might need to max out a credit card -- and that's okay. (Note: If you're currently facing high medical bills, you might benefit from our guide to financing medical expenses.)

You may also consider maxing out a credit card during a balance transfer to take advantage of a low interest rate. Your credit utilization will remain the same since you're just shifting money from one card to another, but you'll pay less interest over the long run.

Example: Say you have five credit cards, each with a $2,000 balance and an 18% interest rate. You get a new credit card with a $10,000 limit and a 0% intro APR on balance transfers for 18 months. You could transfer all of your existing balances to the new card and pay no interest while you work on paying off debt for the next 18 months.

Damage from maxed-out credit cards is temporary

Maxing out a credit card sounds scary, and most people only have one or two cards, so maxing one out is generally frowned upon. But in this case, the devil's in the details. What matters most is using less than 30% of your total available credit across all your credit cards.

One more thing: Some lenders may consider a maxed-out credit card a risk no matter what your credit utilization is. So to get the best rates from lenders, you should consider not maxing out individual credit cards. Spread out spending to get approved for better cards.

Damaged your credit score? You can rebuild your credit by paying off your credit card balances. Once you pay down the balance on your maxed cards, your credit score will recover. You'll see changes to your score as soon as your smart credit habits are reported to the credit bureaus.

Related reads

• How to Increase Your Credit Limit
• If I Pay Off a Credit Card, Will My Credit Score Change?
• Does Applying for a Credit Card Hurt Your Credit Score?