What is credit utilisation?
Credit utilisation is the percentage of your available revolving credit that you are currently using. It is usually calculated by dividing your outstanding balance by your credit limit.
Credit utilisation quick reference
Credit utilisation explained in plain English
Credit utilisation compares what you owe on revolving credit with the limit available to you. If your credit card limit is £2,000 and the balance is £500, your utilisation on that card is 25%.
It is usually most relevant for credit cards and similar accounts where the balance can go up and down. A personal loan is different because it has a fixed repayment schedule and does not usually have a reusable credit limit.
High utilisation can suggest that you are relying heavily on available credit. Low utilisation can suggest more headroom, but it does not automatically mean someone is financially comfortable. Income, bills, debts and savings still matter.
Utilisation can be calculated for one account or across all revolving credit accounts together. Both views can be useful: one card may be close to its limit even if your overall utilisation looks lower.
Credit utilisation formula
Divide the balance by the credit limit, then multiply by 100.
credit_utilisation = (balance ÷ credit_limit) × 100
Example:
balance = £500
credit limit = £2,000
credit_utilisation = (£500 ÷ £2,000) × 100
credit_utilisation = 25%
Work out card payoff time
If utilisation is high because of a card balance, estimate how long it could take to clear with a fixed monthly payment.
Single-card vs overall utilisation
You can calculate utilisation for each card and for all cards together.
| Account | Balance | Limit | Utilisation |
|---|---|---|---|
| Card A | £500 | £2,000 | 25% |
| Card B | £1,200 | £1,500 | 80% |
| Combined | £1,700 | £3,500 | About 49% |
In this example, the combined utilisation is about 49%, but Card B is much closer to its limit. That can matter when deciding which balance to reduce first.
Why credit utilisation matters
Credit utilisation matters because it can reveal how much available credit is already being used. It can also help you spot accounts that are near their limit and may be creating budget pressure or interest cost.
From a practical budgeting point of view, high utilisation can mean less room for emergencies and more interest if the balance is not repaid in full. It can also make minimum payments larger or keep a card balance around for longer.
Plan a payoff order
Use the debt snowball calculator to compare paying down cards by smallest balance or highest APR.
Credit utilisation vs total debt
A person can have low utilisation but still have high total debt if they also have large loans. That is why utilisation is useful, but it is not the whole debt picture.
How to reduce credit utilisation
- Pay down card balances: lowering the balance is the most direct way to reduce utilisation.
- Stop new spending: avoid rebuilding the balance while making repayments.
- Pay before the statement date: this may reduce the reported balance, depending on the card issuer.
- Spread repayments carefully: reduce the highest-utilisation or highest-APR card first depending on your goal.
- Keep cleared cards under control: do not use unused limits as an excuse for more borrowing.
- Check affordability: make sure extra repayments do not leave you short for essentials.
Common mistakes
- Only checking the total: one card can be near its limit even if your combined utilisation looks moderate.
- Ignoring APR: a high-utilisation card may not be the most expensive if another card has a much higher APR.
- Using credit limit as spare money: available credit is borrowing capacity, not income.
- Making minimum payments only: the balance can take much longer to clear.
- Reducing utilisation with new debt: moving debt around can help only if the total cost and behaviour improve.