Credit Utilisation Explained: How Much of Your Limit Should You Use?
Credit utilisation is one of the simplest parts of your credit score to understand, and one of the quickest to change. It's the share of your available credit that you're using. Lower is generally better, but you don't need to stop using your cards to keep it healthy.
Key takeaways
- Credit utilisation = your balances ÷ your credit limits, shown as a percentage.
- Experian suggests keeping it below about 25%, and its older guidance says below 30%. Lower is better.
- Lenders look at each card and at your overall utilisation across all cards.
- Paying down balances is the most reliable way to lower it. Asking for a higher limit works too, if you won't spend more.
- Utilisation is based on reported balances, so timing your payments can make a difference.
This is general information, not financial advice.
What is credit utilisation?
Credit utilisation applies to revolving credit, mainly credit cards and some store cards and overdrafts, where you have a limit and can borrow up to it again and again. It doesn't apply in the same way to loans or mortgages, which have a fixed amount you pay down.
Experian defines it as the percentage of your available credit that you're using. It's a signal of how reliant you are on credit right now.
How to work out your utilisation
Per card: balance ÷ limit × 100.
- £600 balance on a £2,000 limit = 30%
Overall: total balances ÷ total limits × 100.
| Card | Balance | Limit |
|---|---|---|
| Card A | £600 | £2,000 |
| Card B | £0 | £3,000 |
| Card C | £400 | £1,000 |
| Total | £1,000 | £6,000 |
Overall utilisation is £1,000 ÷ £6,000 = about 17%. But Card C on its own is at 40%. Lenders may look at both, so a single card close to its limit can still count against you, even if your overall figure looks fine.
How much of your credit limit should you use?
There's no exact cut-off that every lender uses. As a rule of thumb, Experian suggests using no more than about 25% of your limit to help protect your score. Its factsheet says to avoid borrowing more than 30% of the limit on any card if you can. Lower is better.
That doesn't mean you can't use more. Experian also points out there are good reasons to use more credit, such as spreading a planned purchase on a 0% card. The aim is to bring the balance back down when you can.
Why lenders care about utilisation
- High utilisation can suggest you're stretched, and that more borrowing could be hard to repay.
- Low utilisation with on-time payments shows you have credit available but use it carefully.
- A sudden jump in utilisation can stand out, especially when combined with cash withdrawals or minimum-only payments.
Does paying in full every month mean 0% utilisation?
Not necessarily. Card providers usually report your balance to the credit reference agencies once a month, often around your statement date. If you spend £1,500 on a £2,000 limit and pay it all off by the due date, your report may still show a £1,500 balance, which is 75% utilisation, for that month.
That's rarely a problem in itself, because lenders can also see you clear the balance. But if you're about to apply for a mortgage or another important loan:
- Pay down the balance before your statement date, not just before the due date.
- Or spread spending across cards so no single card is near its limit.
How to lower your credit utilisation
- Pay down balances. The most direct way. Target cards closest to their limit first, or the highest rate first if you're focused on interest.
- Make an extra payment mid-month before the statement date.
- Ask for a higher limit, but only if you won't spend more. Experian warns to avoid higher limits if you might overspend.
- Keep old fee-free cards open rather than closing them, if you carry balances elsewhere. See Does Closing a Credit Card Affect Your Credit Score? (UK).
- Move expensive balances to a 0% card. A balance transfer doesn't reduce the total you owe, but it can help you pay it off faster. See How Do Balance Transfers Work? A Plain-English UK Guide.
- Avoid using cards for cash. See Credit Card Cash Withdrawals: Fees, Interest and Using ATMs Abroad.
Utilisation and credit-builder cards
Credit-builder cards often start with low limits, sometimes £250 to £1,500 or less. With a £300 limit, a £150 purchase is already 50% utilisation. If you're building credit:
- Use the card for one or two small regular payments.
- Pay off in full each month.
- Consider an extra payment before the statement date if you've spent more than usual.
See Credit builder credit cards and Credit Builder Credit Cards: How to Build Your Credit Score Safely.
Utilisation is only one part of your score
Your payment history, how long you've had credit, recent applications and public records such as CCJs all matter too. Missing a payment usually does more harm than temporarily high utilisation. For the full picture, see How to Improve Your Credit Score in the UK: 10 Practical Steps.
Frequently asked questions
What is a good credit utilisation ratio in the UK?
Experian suggests keeping it below about 25%, and lower is generally better. There isn't one fixed figure that all lenders use.
Is 0% utilisation bad?
Not really. Having no balance is fine. Using a card lightly and paying it off shows active, careful use, but you don't need to carry a balance or pay interest to build a good score.
How quickly does my score change after I pay down a balance?
Usually after your card provider next reports to the credit reference agencies, which is typically monthly. It can take a few weeks to show.
Do overdrafts count towards credit utilisation?
Overdrafts are reported on your credit file and lenders may consider how much of an arranged overdraft you use. How each agency scores it varies.
Does a balance transfer lower utilisation?
It moves debt rather than reducing it. Your overall utilisation only falls if you pay the debt down or your total limits increase. Opening a new card adds to your total limit, but it also adds a hard search.
This is general information, not financial advice. Each credit reference agency and lender uses its own scoring.