What is Credit Card Utilisation?


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By Cai Bradley
Updated on Thursday 30 July 2020

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Using a credit card to build your credit score is definitely a good idea, but before you do so, it’s important to understand credit card utilisation and how much of your credit limit you should use each month.

While it might seem quite a complicated term, credit utilisation is far more straightforward than it sounds.

Here, we explain what credit utilisation is, how it can impact your credit rating, and how much of your credit card limit you should aim to use each month.

What is credit utilisation?

Your credit utilisation rate (sometimes referred to as a credit utilisation ratio in the UK) refers to how much of the credit available to you – i.e. your ‘credit limit’ – that you are actually using on a monthly basis.

For example, if you had a credit card limit of £2,000 and spent £200 on it in a month, your credit utilisation rate would be 10%.

How does credit utilisation affect your credit score?

It’s universally accepted that your credit utilisation rate has an impact on your credit score, and a relatively significant one at that.

It is a factor considered when lenders assess your creditworthiness, as it generally gives an indication of your ability to manage and pay back the credit that you borrow. It also shows whether or not you are too reliant on credit, so remember that a high credit utilisation rate isn’t always a good thing.

What is a good credit card utilisation rate?

Is high credit utilization bad? Or is 0% credit utilization bad? In short, the optimal credit utilisation rate lies somewhere in-between.

How much should I spend on my credit card? The most recommended strategy is to keep your credit utilisation rate under 30%, or even under 20% in some cases. You should, however, be aware that not using any credit at all could also damage your credit rating.

As you begin to experiment with using a credit card, you’ll find that it is a delicate balancing act of using enough credit, but not using too much.

Read more: How Many Credit Cards Should I Have?

Is your credit utilisation ratio too high?

While you must have some sort of credit usage in order to build a credit history, it’s worth noting that borrowing too much could also damage your credit file. 

Equifax – one of the main credit reference agencies (CRAs) in the UK – reported that those who use 50% or 75% of their credit limit will receive an ‘amber flag’ on their credit report, meaning that their credit score could be damaged.

If you have a credit utilisation rate of over 75%, this will show as a ‘red flag’ on your Equifax credit report and will almost certainly negatively affect your overall credit rating.

Even if you pay it all back, using too much credit suggests that you are too reliant on credit and may not be the most reliable borrower.

If a credit reporting website tells you that your total credit card % utilisation is relatively high, you should check whether this is true by viewing your report from some other websites first, but consider reducing the amount you borrow per month in order to bring it down slightly if needs be.

Is your credit card utilisation rate too low?

Using no credit is not good for your overall credit rating, as you need to borrow a certain amount of your credit limit in order to show that you are a responsible borrower and can make repayments reliably.

You don’t need to use 20% or 30% of your credit limit, but as long as you use your credit card to pay for something every month – such as your fuel or food shopping – you will keep your credit card utilisation rate above 0% and will therefore begin to build a good credit history.

Read more: Why Has My Credit Score Gone Down?

How to improve your credit score

There are many ways to improve your credit score, including the following:

  • Always make repayments on time
  • Spend on your credit card little and often (to build an optimal credit utilisation rate)
  • Register on the electoral roll
  • Limit your credit applications
  • Never borrow more than you can afford to pay back
  • Check your credit report often

In order to keep track of your creditworthiness and how you are seen from the perspective of lenders, it’s crucial that you check your credit report monthly or at least a few times a year.

If you check your credit report and notice that it has a mistake on it, you should contact both the credit reporting website (ClearScore, for example) and the credit reference agency that provided them with the information (which would be Experian if you used ClearScore).

Your credit score is a good indicator of the overall health of your credit file, but it’s the actual information within your credit report that lenders see, so don’t stress too much about the three-digit number you’re given.

Check your credit score today

There are many credit reporting websites available in the UK and, because they all use different information from various credit reference agencies, you will often find that your credit score differs between each one.

In order to get the most extensive and accurate credit report, we recommend using Check My File, a multi-agency credit reporting website that provides users with information from four of the main CRAs in the UK – Equifax, Experian, TransUnion and Crediva.

By using Check My File, you aren’t required to sign up to multiple credit checking websites to work out your average credit score – you get everything you need from four of the main CRAs, all in one place.

For more information on credit reports and scores, credit cards and everything else you need to know about personal finance, browse our website or check out our related guides below:


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