Scroll through any personal finance forum and you will see the 30% credit utilisation rule: keep your credit card balances below 30% of your limits or watch your credit score plummet.
But the truth for Brits is that this ubiquitous advice comes from American FICO scoring models, not UK credit reference agencies. Understanding how credit utilisation in the UK actually works could save you from arbitrary self-limitations.
What is the credit utilisation ratio in the UK and what is considered normal? It is your outstanding credit card balance divided by your credit limit, expressed as a percentage. If you’ve spent £500 on a card with a £2,000 limit, your utilisation is 25%. So, how to calculate credit utilisation percentage across multiple cards? Add up all balances and divide by total available credit.
This metric is a quick signal to lenders showing how dependent you are on credit. High utilisation suggests financial stress, while very low usage demonstrates restraint.
The 30% threshold originates from FICO, the dominant American credit scoring model. For them credit utilisation ratio comprises 30% of your overall credit score and this makes it the second-largest contributing factor after payment history. FICO's algorithm also penalises consumers progressively: under 10% utilisation is excellent, 11-29% is good, but crossing 30% can trigger score degradation. That’s two 30% rules, though even in the US, it is not always a concrete rule.
This creates clear behavioural incentives for American consumers and with a concrete ceiling. American credit educators subsequently canonised this figure and it spread globally through English-language financial content. But FICO doesn't operate in the UK. Experian, Equifax and TransUnion do instead, and they use proprietary models with different weightings and thresholds.
UK credit reference agencies treat utilisation as one of many credit score factors, not a dominant metric or one with rigid thresholds. Each of the three agencies has its own scoring models that consider how credit utilisation affects credit performance within broader financial behaviour patterns.
UK agencies don't publish specific utilisation thresholds. Industry insiders suggest British scoring favours gradual curves over sharp cut-offs. A borrower at 35% utilisation might score similarly to someone at 25%, particularly if other factors are strong.
More importantly, though, UK lenders often bypass generic credit scores entirely and instead use internal scorecards that weight total debt pounds over utilisation percentages. A £1,000 balance on a £3,000 limit (33% utilisation) might concern lenders less than £5,000 on a £20,000 limit (25% utilisation), despite the lower percentage.
UK lenders examine utilisation trends. Consistently hovering around 40% might score better than erratic swings between 5% and 60%. Ultimately, we must treat it with more nuance than the 30% rule.
As there are no rigid thresholds, it is better to aim for sustainable habits rather than magical numbers. Keep utilisation below 25% as a soft guideline, certainly, but don’t obsess over it. Consider your total debt exposure instead.
It is best to pay balances before statement dates to report lower utilisation without changing your spending patterns. Maintain old cards for higher total limits, even if unused, though don’t overdo this, as too many unused cards may also not be ideal. Request limit increases on established accounts, as this instantly lowers utilisation percentages. Remember, UK lenders value consistency and control.
The 30% rule, though wrong, isn’t the worst rule to live by, even in the UK. But it can limit you and it can mean making credit score mistakes elsewhere because your focus is misplaced.
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