Utilisation is the second largest scoring factor in most models and is widely misunderstood.
What it measures
Balances as a proportion of available limits.
Which is calculated per account and in aggregate.
Reporting timing
Bureaus receive a snapshot on a statement date.
Which is not necessarily when you pay.
Paying in full
Clearing the statement balance still reports the statement figure.
Which surprises people who pay every month and see high utilisation.
Limit changes
Higher limits reducing the ratio without changing behaviour.
Which is why closing unused cards can hurt.
The thresholds people quote
Common advice suggests keeping utilisation below a particular percentage.
Which is a rough guide rather than a rule in the models.
Lower is generally better, with zero across all accounts occasionally scoring slightly worse than a small balance.
Paying before the statement date
Reducing the balance that gets reported.
Which lowers reported utilisation without changing your spending.
Per-card against overall
One maxed card can affect scoring even with low overall utilisation.
Which argues for spreading balances.
Limit reductions
Issuers reducing limits and raising utilisation without any action from you.
The practical action
Know your statement dates, and pay before them if you want the reported figure to be lower.
Why the reported figure differs from what you feel
Bureaus receive one snapshot per cycle, usually at the statement date.
Which means someone who spends heavily and pays in full every month can still report high utilisation.
Paying a few days before the statement, rather than on the due date, changes the number reported.
Effect duration
Utilisation has no memory in most models.
Which means a high month affects the score only while it is reported.
This is unlike payment history, which persists for years.
Requesting limit increases
Lower utilisation without changing behaviour.
Which may involve a hard search depending on the issuer.
Closing accounts
Reduces total available credit and raises utilisation.
Which is why closing an unused card can lower a score.
A general note
Scoring models differ; this is a general description rather than a rule that applies identically everywhere.
Putting it into practice
Find your statement date, note what balance is outstanding on it, and pay down before that date if you want a lower reported figure.
Which is a small operational change with a measurable effect.
This matters most in the months before a mortgage or major credit application.
Before a major application
Reducing reported balances, avoiding new applications and checking files for errors.
Which should start several months ahead rather than the week before.
Overdrafts
Treated as revolving credit by many models.
Which means a persistently used overdraft affects utilisation too.
What not to do
Opening accounts purely to raise available credit shortly before applying.
Which the hard searches and account ages work against.
The summary
Utilisation is a snapshot, it has no long memory, paying before the statement date is the practical lever, and closing old accounts usually hurts rather than helps.
A worked example of the timing effect
Someone who spends heavily each month and clears the balance in full still reports whatever was outstanding at the statement date.
Which can look like high utilisation despite never paying a penny of interest.
Making a payment a few days before the statement closes changes the reported figure entirely, with no change in behaviour or cost.
Why this matters before a mortgage
Lenders assess the file at a point in time.
Which makes the months before an application the ones where this is worth managing.
Multiple cards
Spreading balances rather than concentrating them.
Which affects per-card utilisation.
What not to obsess over
Small movements in a score with no application pending.
Where to get help that costs nothing
Most countries have free, regulated debt advice services funded by government, charity or by the creditor sector itself. They will review your whole position, explain every option available in your jurisdiction, and deal with creditors on your behalf if you ask them to.
They do not sell products, they do not charge, and they deal with situations far worse than yours every working day without judgement. The most common thing their advisers say is that people contact them years later than they should have.
Commercial firms offering the same services for a fee exist alongside them and are frequently advertised more heavily, which is the main reason many people never find the free option.
A general note
This article describes how these arrangements generally work and is not financial or legal advice. Rules, protections, terminology and available solutions differ substantially between countries and change over time, and anything with consequences for your home, your credit standing or your legal position warrants advice specific to your circumstances.
One thing worth remembering
Debt problems are experienced as personal failure and are usually the result of something ordinary: an income drop, an illness, a relationship ending, a bill that was larger than expected.
The people who resolve them are not more disciplined than everyone else. They are generally the ones who opened the letters, wrote down what was owed to whom, and asked someone for help earlier than felt comfortable.
None of those three steps costs anything, and all of them get harder the longer they are postponed.