What is credit utilisation ratio and what is a good percentage?

Full answer

Credit utilisation measures how much of your revolving credit (credit cards and similar) you are using relative to your total limits. The calculation is simple: divide your total outstanding balances by your total credit limits and multiply by 100. For example, if you owe GBP 1,500 across cards with a combined limit of GBP 6,000, your utilisation is 25%. Why it matters: in the UK, credit-reference agencies such as Experian, Equifax, and TransUnion feed this figure into your credit score. High utilisation signals to lenders that you may be over-reliant on credit, which can lower your score and make mortgages, loans, and new cards harder or costlier to obtain. Low utilisation suggests you manage credit comfortably. Who it affects: anyone with a credit card, store card, or other revolving facility - especially people preparing to apply for a mortgage, where lenders scrutinise affordability and credit history closely. Worked example: suppose you have two cards, one with a GBP 2,000 limit carrying a GBP 1,800 balance (90% on that card) and another with a GBP 4,000 limit and no balance. Your overall utilisation is GBP 1,800 / GBP 6,000 = 30%. Spreading the balance, paying down before the statement date (when the figure is usually reported), or requesting a limit increase can all reduce the reported ratio. Practical tips: aim to keep utilisation low not just overall but on each individual card, pay more than the minimum to cut interest, and avoid closing old cards unnecessarily because doing so removes available limit and can push your ratio up. Note this is a creditworthiness metric, not a tax or statutory figure - there is no official UK 'threshold', only lender preference. If you are clearing card debt, a compound interest calculator can help you see how quickly overpayments reduce the balance.

Try the calculator