What is a credit utilisation ratio?
Written by
Emily Tye
Reviewed by
Amy LancashireYour credit utilisation ratio is the percentage of your available revolving credit (usually credit cards and store cards) that you're currently using. If you have a credit card with a £1,000 limit and a balance of £250, your credit utilisation ratio is 25%.
It's one of the key factors credit reference agencies use when assessing your credit score, and one of the more straightforward ones to manage once you understand how it works.
How do I calculate my credit utilisation ratio?
Divide your outstanding balance by your total credit limit, then multiply by 100.
Formula: (outstanding balance ÷ credit limit) × 100
Example: Say you have two credit cards:
Card A: £500 limit, £150 balance
Card B: £1,500 limit, £350 balance
Total balance: £500.
Total credit limit: £2,000.
£500 ÷ £2,000 × 100 = 25% credit utilisation ratio
Why does my credit utilisation ratio affect my credit score?
High utilisation signals that you may be financially stretched or reliant on borrowed money. Low utilisation signals that you have access to credit and manage it carefully. Credit reference agencies use this as one of the indicators of how risky you are as a borrower.
The three UK credit reference agencies (Experian, Equifax and TransUnion) each use their own scoring models and don't publish exact weightings for individual factors. However, both Experian and Equifax identify credit utilisation as a significant factor in their publicly available guidance, while TransUnion advises keeping well within credit limits.
This differs from the US, where the FICO scoring system publishes category weightings. Those figures don't apply to UK credit scoring.
What is a good credit utilisation ratio?
Both Experian and Equifax recommend keeping your utilisation at or below 25%, which is consistent with Zable's own guidance.
There's no single threshold that acts as a hard guarantee – your score depends on a combination of factors. But as a general principle: the lower your ratio, the better.
How can I lower my credit utilisation ratio?
Pay down your balance: The most direct approach. Even a partial reduction will bring your ratio down.
Request a credit limit increase: A higher limit lowers your utilisation automatically, as long as your spending stays the same. Before requesting an increase, check whether your lender runs a hard credit check, as a hard check can cause a temporary dip in your score.
Keep old accounts open: Cancelling a credit card reduces your total available credit, which pushes your utilisation ratio up even if your spending hasn't changed. Unless there's a clear reason to close an account, keeping older cards open generally works in your favour.
For other ways to build your credit profile, see our guide on improving your credit score.
FAQ
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