Credit basics · 6 minute read
Utilisation, and why it moves fastest
The one factor that has no memory. Get it down this month and the effect lands next month — which makes it the most useful lever in the whole system.
What it actually is
Take the balance reported on a revolving account, divide it by the credit limit, and you have that card’s utilisation. Add all the balances and all the limits together and you have your overall utilisation. Both are looked at.
Instalment loans — a car, a mortgage, a student loan — are treated differently. Owing $18,000 of a $20,000 car loan is normal and is not read the way a card at 90 per cent is.
The statement date, not the due date
This is the part almost nobody is told. Your issuer reports the balance shown on your monthly statement. If you spend $900 on a $1,000 card and pay it in full on the due date, you were never in debt for a day — but 90 per cent utilisation was reported, and that is what the model saw.
Pay the card down before the statement closes and the reported figure is whatever is left. Same spending, same cost, different number. Your statement closing date is on the statement; it is usually about three weeks before the payment due date.
Under 30 per cent is the number people quote, and it is a reasonable ceiling. In practice the files that score best sit under 10 per cent with at least one card reporting a small non-zero balance — reporting zero on everything can very slightly underperform, because the model likes evidence that you are using credit responsibly rather than not at all.
Raising the denominator
Utilisation falls if the balance goes down or the limit goes up. A limit increase on an existing card is often available for the asking, and many issuers will do it as a soft pull that costs you nothing. Ask, and ask specifically for a soft-pull review.
The other half of this is not closing things. Closing a card removes its limit from the denominator, which can push overall utilisation up sharply overnight while you have done nothing at all. Unless it charges an annual fee you cannot justify, leave it open and put one small recurring bill on it.
What it will not fix
Utilisation is powerful and shallow. It moves the number quickly and it does nothing about a charge-off from 2021, a collection, or a bankruptcy — those age off on their own schedule regardless of what your cards look like.
So it is the right first move and the wrong whole plan. Get it down because it is fast and free; then go back to the slow work.
Nobody here is going to tell you off.
The first conversation is free, it takes about half an hour, and it ends with you knowing what is actually on your file and what can honestly be done about it. If the answer is "nothing we can charge for", we will tell you that, and you will still get the plan.
Not ready to talk to anyone? Take the guide and do it yourself. It is the same method, it costs nothing, and you never have to tell us you used it.