What Is the Maxed-Out Credit Card Penalty?

What Is the Maxed-Out Credit Card Penalty?

• A single credit card over 80% usage is considered maxed out, which can cause your credit score to drop 80+ points.
• Even a card with a $300 limit and a $240 balance is considered 80% maxed out.
• Carrying zero balance and keeping the card on autopay is the easy way to avoid this penalty.

This Penalty Can Go Away Fast

• Carrying zero balance and keeping the card on autopay is the easy way to avoid this penalty.
• Paying the card down 20% can make most of the penalty go away fast — e.g. a card with a $300 limit and a $290 balance can regain about 75% of the points by paying $150 on it.
• If you have a large balance in the thousands of dollars, schedule a 1-on-1 with your Rental Kharma mentor to discuss a plan.

Maxing Out More Than One Card

• Yes, this can compound the penalty and depress your score even more.
• You're better off having 1 card with a higher limit than many cards with low limits — this can prevent multiple penalties for what is the same life event.