Credit utilisation is the percentage of your available revolving credit that you are currently using. If you have a credit card with a £5,000 limit and you currently owe £2,500 on it, your utilisation on that card is 50 percent. If you have two cards, each with a £3,000 limit, and you owe £1,500 on one and nothing on the other, your overall utilisation across both cards is 25 percent.
This ratio is one of the most heavily weighted factors in credit scoring models. High utilisation signals to lenders that you may be financially stretched, even if you make every payment on time. Low utilisation signals that you have access to credit but do not rely on it, which is treated as a positive indicator.
What counts as a good utilisation rate?
The commonly cited guideline is to keep utilisation below 30 percent of your available credit. In practice, lower is generally better. People with excellent credit scores typically show utilisation rates below 10 percent. This does not mean you should never use your credit card. It means you should be mindful of how much of your available credit you are using at any given time, particularly if you are about to apply for a mortgage or other significant credit product.
The timing matters as well as the amount
Credit card balances are reported to credit reference agencies at a specific point in the month, typically your statement date. This means your utilisation as recorded on your credit file reflects your balance on that date, not your average balance or your balance after you have paid it off. If you pay your card in full every month but carry a high balance up to the statement date, your reported utilisation may still look high even though you are not paying any interest.
If you want to reduce your reported utilisation, the most effective approach is to pay down the balance before the statement date rather than waiting until the payment due date.
Why closing unused credit cards can backfire
The instinct when paying off a credit card is often to close the account. This can actually damage your credit score in the short term, because closing the account reduces your total available credit limit, which increases your overall utilisation rate even if your balances have not changed. Keeping a paid-off credit card open and using it occasionally for a small purchase that you pay off immediately is often better for your score than closing it.
Requesting a credit limit increase can help
Increasing your credit limit, without increasing the amount you spend, lowers your utilisation rate automatically. Some card providers offer limit increases periodically. You can also request one, though the provider will run a credit check which creates a hard enquiry on your file. If you have a stable income and a good track record with the card, a limit increase request is often approved and can have a meaningful positive effect on your utilisation percentage.
Secure payment via Stripe. Cancel anytime.
Ask Fin provides general guidance only, not regulated financial advice. Credit scoring models vary by lender and credit reference agency.