Maxing out your credit card can lead to negative consequences, according to a credit expert with over 20 years of experience.

A survey by Bankrate found that nearly 40% of U.S. credit card holders have maxed out their cards or are close to doing so, according to the October credit utilization survey.

Maintaining a balance on your credit card from month to month can negatively impact your credit score.

According to John Ulzheimer, a credit expert with over 20 years of experience who previously worked for FICO and Experian, running up large balances on credit cards leads to nothing good.

Your credit utilization rate, which is the percentage of available credit you're using at a given time, significantly impacts your credit score. It accounts for 30% of how your FICO credit score is calculated and is a highly influential factor used to determine your VantageScore credit score.

Maxing out your credit card can negatively impact your credit score, as 41% of Americans have experienced a decline in their credit score due to this behavior, according to Bankrate.

Why it's worth keeping your credit utilization low

According to Ulzheimer, the credit scoring agencies did not randomly decide to make credit utilization ratio a significant factor in credit scores. They had evidence to support their decision.

""As the utilization ratio increases, the probability of someone missing a payment also rises," he explains."

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Keeping your utilization rate below 10% is recommended by Ulzheimer.

"Less than 10% utilization ratio is the optimal ratio for a reason," he explains. "Individuals with utilization ratios below 10% are the least risky for that specific metric, which is why they receive a substantial number of credit score points."

How to keep your credit utilization low

To keep your credit utilization rate low and positively impact your score, consider implementing these two strategies.

1. Ask for an increased credit limit

Requesting a higher credit limit from your lender can enhance the ratio of available credit to utilized credit.

If you have a balance of $2,000 on a credit card with a $6,000 limit, your credit utilization rate drops to around 33%.

To be approved for a limit increase, you typically need to have good credit and a history of on-time payments. It's also important not to overspend on your new limit.

2. Don't close old credit cards

In addition to boosting your credit score by increasing your credit age, keeping older cards open can also enhance your credit utilization rate.

If you have an unused credit card, it still counts towards your utilization ratio, according to Ulzheimer.

If you have two credit cards with a $5,000 limit each and hold a balance of $2,000 on one card, your utilization rate is 20%. However, if you close one of the cards, your overall credit limit is cut in half, and your credit utilization rate increases to 40%.

"Closing older inactive accounts will increase your credit score ratios, leading to a decrease in your credit scores, according to Ulzheimer."

Consistently making on-time payments, keeping utilization low, and avoiding opening too many new lines of credit are key to improving your credit score, Ulzheimer advises.

He says that although the advice is not always easy to follow, it is a good strategy.

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