How Your Credit Utilisation Ratio Impacts Your Credit Score
8th Sep 2025
When it comes to building and maintaining a healthy credit score, one of the most important factors lenders assess is your credit utilisation ratio. Understanding and managing this ratio can significantly improve your financial standing and boost your chances of credit approval.
What Is Credit Utilisation Ratio?
Credit utilisation ratio is the percentage of your available credit that you are currently using. For example, if you have a total credit limit of £10,000 and you are using £3,000, your utilisation ratio is 30%.
This ratio applies to all revolving credit accounts, such as credit cards and overdrafts.
Why Does It Affect Your Credit Score?
Credit reference agencies and lenders use your credit utilisation ratio to gauge how reliant you are on borrowing. A high utilisation ratio suggests you may be overextended, which can lower your credit score. On the other hand, a low ratio indicates responsible credit management.
What Is the Ideal Credit Utilisation Ratio?
Experts recommend keeping your credit utilisation ratio below 30%. Staying within this threshold shows lenders that you are managing your available credit wisely and are less likely to default on payments.
How to Improve Your Credit Utilisation Ratio
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Pay off existing balances regularly – Reducing outstanding debt lowers your ratio.
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Request a higher credit limit – If your limit increases while your balance stays the same, your utilisation ratio improves.
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Spread debt across multiple accounts – This prevents any single account from being heavily utilised.
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Avoid maxing out credit cards – High balances signal financial strain to lenders.
Does Closing a Credit Card Affect It?
Yes, closing a credit card can reduce your total available credit, which may increase your credit utilisation ratio if you carry balances elsewhere. Before closing an account, consider how it will affect your overall ratio.
Conclusion
Your credit utilisation ratio plays a crucial role in determining your credit score. Keeping your usage low, ideally under 30%, can help maintain a healthy score and improve your chances of being approved for loans, credit cards, and mortgages. By managing your credit responsibly, you can strengthen your financial future.
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