Credit utilisation and your credit score

Credit utilisation is the amount of credit you are using compared with the limit on your card¹. If you have a credit card with a £2,000 limit and you have spent £1,600, your credit utilisation is 80%². It is one of the inputs lenders weigh when they score you, because credit scoring is the system creditors use to decide how much of a risk it is to lend to you³.

Credit is widely used in the UK: 85% of all adults use some form of credit⁴, and 56% of UK adults used a credit card to pay for goods or services in the 12 months covered by the Financial Lives Survey published in 2024⁵. Because so many people carry cards, the share of their limits they use is a figure that follows them around every time they apply for borrowing.

What credit utilisation means

Credit utilisation measures how much of your available revolving credit you have actually drawn down. It is usually expressed as a percentage: your balance divided by your credit limit. The credit utilisation ratio, as it is often called, is one of the pieces of information a lender can draw on when it scores an application, alongside things like your payment history, how long you have held accounts, and how many applications you have made recently.

The figure matters because of what it signals. A borrower using a small share of a generous limit looks like someone in control of their borrowing. A borrower sitting close to their limit, or over it, looks like someone who may be stretching. That is why lenders and service providers also report instances where you go over any agreed credit limit, which can impact your credit score⁷.

Utilisation applies to revolving credit, which in practice means credit cards and store cards, and overdrafts are treated differently: overdraft usage shows up on your credit report¹⁰, but there is no "percentage of limit" calculation in the same way. Personal loans are fixed-sum agreements repaid on a schedule, so they do not produce a utilisation ratio at all, though they still appear on your report.

How to work out your credit utilisation ratio

The calculation itself is simple arithmetic: divide the balance you owe by your credit limit, then multiply by 100 to get a percentage. A £2,000 limit with £1,600 spent gives a utilisation of 80%². A £500 balance on a £2,000 limit gives 25%¹.

The practical difficulty is knowing which balance is being measured. Credit reference agencies do not see your account in real time. They see what your lender reports to them, usually once a month, on a set reporting date. If you spend heavily in the first week of the month and clear the balance before the statement date, the reported figure can still be the high one, depending on when your lender reports. This is why two people with identical spending habits can have different reported utilisation.

It also works across cards as well as on each card. A mortgage guide's worked example shows a total of £1,400 owed against a £3,500 combined limit, a 40% overall ratio, made up of one card at 25% and another at 60%⁶. Both views exist: the ratio on each individual card, and the total across all your cards measured against your total limits.

The 25% to 30% guideline: what lenders and agencies suggest

There is no single official threshold at which utilisation becomes a problem, but the guidance that exists clusters in a narrow band. One card provider states that keeping balances below 25% of your available credit limit should help⁷. Guidance on getting a mortgage with credit card debt puts the figure differently: generally, it is recommended to keep your credit utilisation rate below 30%⁶. The two documents disagree on the exact number, and there is no ruling that settles it, so both are given here.

For context, the UK Cards Association estimated the average utilisation rate at about 25%⁸, which suggests a typical cardholder sits at or below both suggested ceilings. But averages hide the tails. The FCA's credit card market study found a further 2 million people who had held a balance above 90% of their credit limit for at least a year⁹, a level far above any of the guidelines.

The reason no single threshold exists is that each lender builds its own scoring model and each credit reference agency presents its own score. A ratio that reads as unremarkable to one lender may read as elevated to another. The practical reading of the guidance is directional: lower is generally better, and the further above the high twenties in percentage terms you go, the more it can count against you.

How high utilisation can lower your credit score

High utilisation can lower your score in two ways: directly, because the ratio itself is an input into scoring, and indirectly, because things that push utilisation up often get reported as well. Going over your agreed credit limit is reported by lenders and service providers and can impact your credit score⁷.

The clearest illustration of the indirect route is a credit limit cut. If a lender reduces your limit, your credit utilisation ratio, which measures how much credit you are using relative to your limits, may spike, which can bring your credit score down¹¹. Nothing about your borrowing has changed: you owe the same money on the same card. But the denominator of the fraction has shrunk, so the ratio rises, and the score can follow.

The scale of the effect varies, because scores are built from many inputs. A missed payment, a default or a county court judgment will usually weigh more heavily than a few percentage points of utilisation. But utilisation is one of the few inputs you can move quickly, in either direction, which is why it receives so much attention in guidance on improving a score.

Examples: the same balance, very different ratios

The same debt can produce very different ratios depending on the limit behind it. Say your balance is £500. If your limit is £2,000, your credit utilisation rate is 25%. But if your limit drops to £1,200, your utilisation rises to over 40%¹. The debt is identical; only the room around it has changed.

The same effect works at the other end of the scale. In an example from a report on credit limit reductions, a £12,500 limit on a credit card with a £200 balance meant only 1.6% of the credit had been used¹¹. A balance that would look heavy on a £500 limit looks negligible on a large one.

Debt advice guides show the same £3,200 credit card balance appearing in worked examples of two different repayment methods, where it is listed at 28% of the limit with a £99 payment¹². That figure is a reminder that utilisation is not the same as affordability: a 28% ratio can be entirely manageable for one person and a struggle for another, depending on income and other commitments.

Credit limits: how they are set and where to find yours

A credit limit is the maximum a provider has agreed you can owe on the card at any one time. Providers do not have to give you a credit card, and your application may be refused if your credit score is low or you are not considered able to afford the repayments¹⁴. The limit you are given is set by the provider's own assessment of risk and affordability, not by anything you choose.

Where to find yours: your monthly statement shows your credit limit alongside your balance, and most card apps and online banking services display it on the account summary. If you have a card with no fixed limit stated, the rules on pre-contract disclosure fill the gap: for running-account credit where the credit limit is not known at the point of disclosure, the total amount of credit is assumed to be £1,200, or where credit is provided subject to a maximum limit of less than £1,200, an amount equal to that maximum limit¹⁵.

Cards designed for building or repairing a credit history typically come with lower spending limits¹⁶, so a modest balance on one of these cards can produce a high utilisation ratio. That is worth knowing before you apply, because it means the same spending that looks trivial on a mainstream card can register as heavy on a credit-builder card.

Raising, lowering or cutting a limit changes your ratio

Because your limit is the denominator of the ratio, any change to it moves your utilisation without your debt changing at all. A higher limit lowers the ratio; a lower limit raises it. This is why the question "should I increase my credit limit?" has no single answer: a higher limit can improve the ratio, but only if the balance does not grow to fill it.

The evidence on what happens after limit increases is cautionary. A review of credit card literature found that an increase in credit limit is followed by an immediate and significant rise in credit card debt, averaging between 10 and 14 percent of the total credit limit, though this finding comes from US credit card accounts rather than UK ones¹⁷. The mechanism is simple: more available credit makes more spending possible.

Lenders can also cut limits without you asking. Providers lower credit limits to tighten up outstanding risk, based on spending habits, credit reference agency information, individual spending patterns and policy decisions across a group of clients¹. When this happens, your utilisation ratio may spike, which can bring your credit score down¹¹. In 2021, Barclaycard reduced credit card spending limits for some customers, and the reporting on it set out affected customers' rights¹¹.

On increases, an industry agreement reached through the FCA's consultation on credit card market rules states that new customers will all be given the choice of how credit limit increases are applied to their account, with customers who do not make a choice offered increases on an opt-in basis by default¹⁸. Debt charities have also pressed for changes here: StepChange has proposed making it easier for people to reject catalogue credit and store card credit limit increases, and requiring firms to provide clear information about offers¹⁹. If you would rather not be offered automatic increases on a credit-builder card, you can opt out of letting the lender offer them¹⁶.

Going over your credit limit

Going over your credit limit has consequences on two fronts. First, the provider may charge you a fee for going over the credit limit²⁰. Second, and usually more damaging, lenders and service providers report instances where you go over any agreed credit limits, which can impact your credit score⁷.

The risk is not confined to large balances. A case study in an FCA thematic review describes a young store card customer whose borrowing pushed her over her £50 credit limit²¹, a reminder that a small limit can be breached by a single purchase. Store card balances can also be subject to a higher interest rate than credit card balances, and consumer awareness of that difference was limited²², so the cost of drifting over a store card limit can compound faster than on a credit card.

If you are close to your limit, the options are limited but real: you can ask for a higher limit (which the provider may refuse), you can pay down the balance before further spending, or you can stop using the card. What you cannot do is control the reporting: once you have gone over, the instance can be reported whatever you do afterwards.

Ways to keep your utilisation low

The most direct method is to keep the balance small relative to the limit. One provider's guidance is that keeping balances below 25% of your available credit limit should help⁷. Other guidance puts the ceiling at below 30%⁶. Where the two documents disagree, the lower figure is the more conservative reading.

Paying off your credit card in full can save you money in interest and charges²³, and clearing the balance also brings utilisation to zero at the moment it is cleared. The caveat is the reporting date: the balance the agencies see is the one reported, so timing matters. If your lender reports mid-month and you clear the balance at the end of the month, a high balance may still be recorded for that cycle.

Other levers:

• Ask for a higher limit, if your balance is stable and you will not fill the new room. The provider may refuse¹⁴.
• Keep unused cards open, because closing a card removes its limit from your total and can raise your overall ratio. Closing a card can lower your score, and the impact is likely to be temporary⁷.
• Opt out of automatic limit increases if you would rather not be offered more credit on a credit-builder card¹⁶.
• Spread spending across cards where you hold more than one, so no single card sits at a high ratio. The overall ratio still counts⁶.
• Make more than the minimum payment. If you do not pay off the balance each month, you will be asked to repay a minimum amount, typically around 3% of the balance due or £5, whichever is higher¹⁴. Minimum payments alone can leave utilisation high for years.
• Move the debt to a card with low or 0% interest, which could help you pay off the debt faster²³, though applying for too many cards or regularly switching cards can affect your credit rating¹⁴.

When high balances are a sign of debt trouble

Utilisation is a scoring input, but a persistently high balance is often a debt problem wearing a scoring label. StepChange's research on consumer credit trends notes that some people who use credit as a safety net are using credit in crisis situations and out of desperation²⁴. For those people, the answer is not a lower ratio but debt advice, which is free and independent from charities such as StepChange and National Debtline.

Credit cards, bank loans and some overdrafts are non-priority debts²⁵, which means the consequences of falling behind are serious but not as immediate as, say, rent arrears. Even so, unpaid card debts can escalate: county court judgments are often used as a way of recovering non-priority debts, such as credit card debts and payday loans²⁶. A CCJ is a public record entry that damages your credit file for years.

Signs that a high balance has become a debt problem include only making minimum payments, using one card to pay another, and balances that rise rather than fall. If you have been in persistent debt, where the cost of interest and charges is more than you are repaying, your card provider must contact you, and if the situation continues your account can be suspended: if your account is suspended, you will not be able to borrow any more money, and if you have a credit or store card, the card will no longer work²⁷.

For tackling the debt itself, structured methods exist. The debt avalanche method works through debts in order of interest rate, highest first¹², while the debt snowball method works through them smallest balance first¹³. Both guides use the same worked example, including a £3,200 credit card balance at 28% utilisation¹², which shows how a ratio in the "acceptable" band can still be a debt that needs a plan.

FAQ

These answers summarise the guidance above. For the wider picture of how scores are built, see credit scores and credit reports, and for what lenders see when they check you, see what is on your credit report.

Is it better to use 25% or 30% of my credit limit? Guidance differs slightly between sources. One card provider recommends keeping balances below 25% of your available credit limit⁷, while other guidance suggests staying below 30%⁶. Both point the same way: the lower your utilisation, the better it tends to look to lenders. There is no single threshold at which every score drops, because each lender and credit reference agency weighs the figures differently.

Does closing a credit card affect my credit utilisation? It can. Closing a card removes its limit from the total credit available to you, so if you carry balances on other cards, your overall utilisation ratio rises even though your debt has not changed. Closing a card can also lower your score because long-held, well-managed accounts show you are a reliable borrower. The impact is likely to be temporary⁷.

Does utilisation count across all my cards or each card separately? Both views exist. Lenders and agencies can look at the ratio on each individual card and at your total balances across all your cards measured against your total limits. A worked example shows one card at 25% and another at 60% producing a combined ratio of 40%⁶, so a high ratio on one card can stand out even when the overall figure looks moderate.

When can I ask for a credit limit increase? You can ask your card provider at any time, but the provider does not have to agree. Providers do not have to give you a credit card or a higher limit, and they may refuse if your credit score is low or your circumstances suggest you would struggle¹⁴. Under an industry agreement, new customers are given the choice of how credit limit increases are applied, with increases offered on an opt-in basis by default¹⁸.

Can a lender reduce my credit limit without me asking? Yes. Providers can lower your limit to manage their risk, based on things like your spending habits, information from credit reference agencies, your individual spending patterns and policy decisions across their customer base¹. A lower limit raises your utilisation ratio for the same balance, which can bring your score down¹¹. If a cut causes problems, you can complain to the provider and then to the Financial Ombudsman.

Does paying my balance in full each month keep my utilisation low? It helps with the cost of the debt, because paying off your card in full saves you money in interest and charges²³. But your reported balance is what the credit reference agencies see, and that depends on when the lender reports it. If you clear the balance after the reporting date, a high balance may still be recorded that month.

Do personal loans count towards credit utilisation? No. Utilisation is about revolving credit, chiefly credit cards, where you have a limit and choose how much of it to use. A personal loan is a fixed amount borrowed and repaid on a schedule, so there is no available credit to measure against. Loans still appear on your credit report and affect your record in other ways, just not through a utilisation ratio.