Why keeping your credit utilisation low means better deals on credit

Your credit utilisation (the amount of your credit limit that you’re using) is a key factor in determining your credit score.

If your credit cards are all maxed out, it suggests that you’re struggling to manage your borrowing and your credit score could drop. But if you only use a small amount of your total limit, you could give your credit score a boost.

Remember, the better your credit score, the more likely you are to be accepted for the best deals on credit cards. This means lower interest rates, higher credit card limits, and longer 0% offers.

Your credit utilisation is the percentage of your credit limit that you’re using.

Credit utilisation doesn't just work across one card. You can also calculate how much of your total available credit limit you are using.

It’s best to keep your utilisation below 30%. This shows lenders that you’re managing your credit well and are far from overspending.

If you spend over 50%, it could negatively impact your credit score. And if you use over 75% of your limit, it’s quite likely this will have a negative impact. If you go over your credit limit, not only will this negatively impact your score, but you could get hit with a fee.

While you want to keep your utilisation below 30%, you don’t want it to be zero. If you leave your credit card unused, you’re not building up good repayment history, which is what lenders use to assess your creditworthiness. It’s all about using credit little and often, to maintain a healthy balance.

To keep your credit usage low, firstly make sure you’re aware of your credit limits across your cards. While your credit card provider has to tell you if they’re changing your limit, it can be hard to keep track of. To make this easy for you, you can see all your credit card limits in your ClearScore account.

Obviously, the simplest way of keeping your utilisation low is to spend less on your credit card.

But if you do need to spend more than 30%, you could try these options:

• Spread your payment across two cards, rather than maxing out one card
• Ask your lender to increase your credit card limit (but be careful not to take out more than you can handle)
• Open a new credit card (be aware that applying for a new credit card will result in a hard search on your report, which might cause your score to temporarily drop. Your score should improve again as you start repaying in full each month.)

Managing your credit card utilisation is a relatively easy way to maintain - or even improve - your credit score. While recovering from a late or missed payment might take months or years, lowering your utilisation is a fairly quick way to improve your score.

And the better your credit score, the more likely you are to get better deals on credit. This means you’ll be able to access the lowest interest rates, highest credit card limits and longest 0% offers, saving you money in the long run.