6 min read

Could you improve your score with this one simple change?

Hannah Salih
15 June 2018

Our latest research has revealed that millions of Brits could be damaging their credit scores by using too much of their credit limit. Here's why keeping your credit utilisation in check could boost your score

The percentage of your credit limit that you actually use is known as your credit utilisation, and is one of the factors that affect your credit score.

But our latest research has revealed that millions of Brits might not be aware of this, as we’ve discovered that over 18 million people could be at risk of damaging their score by using over 30% of their credit limit.* In fact, we learned that 78% of people are using more than 50%.

So, to help you put the best foot forward when it comes to improving your credit score, we’re sharing what else we discovered and a few top tips on how to keep your credit utilisation in check.

Hang on, why does my credit utilisation affect my credit score?

Using too much of your credit limit can suggest to lenders that you’re overly reliant on credit and may struggle to pay back any other money you borrow. This can negatively affect your score.

That’s why using around 30% or less is likely to improve your credit score as lenders are more confident you can repay the balance. However, using more than 50% may have a negative effect on your credit score.

Certain areas of the country are, on average, using more of their credit limit than others

We scoured our database and learned that those in Colchester are using on average 118% of their credit limit, the highest level in the country, followed by Newport, where people use on average 84%. London, in spite of being one of the most expensive places to live in the UK, is home to the areas with the lowest credit utilisation in the country. The City tops the chart with 38%, followed by West London at 39%.

Take a look at the full findings below to see how your area measures up…

Areas of the country using the highest % of their available credit:

  • Colchester = 118%
  • Newport = 84%
  • Bath = 70%
  • Coventry = 66%
  • North West London = 66%

Areas of the country using the lowest % available credit:

  • The City of London = 38%
  • West London = 39%
  • South West London = 40%
  • Kingston Upon Thames = 40%
  • North London = 41%

Our CEO, Justin Basini, commented, “Most people need credit at some point in their life, for example, to buy a home or a car. To maintain a good credit score, our advice is not to use too much of your credit limit – stick to less than 30% to show lenders you can manage your credit sensibly.”

It’s not just about how much credit you use, how you pay it back also affects your score

While borrowing a high amount of credit is not a problem when managed well, we discovered that 43% of people have also missed a payment in the last twelve months. Over a third (31%) have had a delinquency, missing a single payment, and 12% have defaulted, missing several payments. This is one of the major factors which could your credit score and may make it less likely that you’ll be accepted for credit products in the future.

Michelle Highman, CEO of The Money Charity, commented, “It’s worrying that so many people are missing payments and putting themselves at risk of damaging their credit history. Whenever you use credit, it’s important to make sure you can pay back the money. If you feel out of control then make sure you seek help; places like StepChange Debt Charity can provide you with independent advice.”

Top tips to keep your credit utilisation in check and improve your credit score

  • Keep your credit utilisation under 30%. For example, if your credit limit is £1000 on a card, you might not want to use more than £300. If you need to use more than 30% of the limit, consider spreading it across another card, rather than maxing out one card.

  • Keep old accounts open and use them for a small purchase every month. Even if you don't use an account that much it could be worth keeping it open as it will give you a higher overall credit limit. This can make it easier to keep your utilisation ratio down.

  • Use a credit card little and often. If you never use credit lenders won’t have any evidence that shows you’re a reliable borrower, which can lead to thin file and a low credit score.

  • Pay your bills on time. This shows lenders you can responsibly manage any money you borrow.

  • Mistakes could impact your score so make sure you’re checking your report regularly and fixing any errors.

  • Getting on the electoral roll helps to verify your identity

  • Use an eligibility checker. Every time you apply for a credit a ‘credit application’ or hard search is carried out which can negatively affect your score.

  • Avoid making multiple credit applications in a short space of time. Too many in a short space of time suggest to lenders you are desperate for credit which can bring your score down further.

*ONS population figures show that the estimated UK populations aged 18+ was 50,371,000. According to ClearScore’s data, 37% of people are using more than 30% of their credit limit. 37% of 50,371,000 = 18,637,270.

by Hannah Salih

Hannah reads all the finance info on the web so you don't have to. She knows all there is to know about your finances but still spends all her money on brunch. 

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