Utilization Rate

samma90

I've received my first ever credit card this month to start building a good credit report. I never go into my overdraft and don't have any debts, and my budgeting is very good. I plan to keep my wages in my current account and do all my spending on my credit card and plan to pay it off in full every month.

However I've just come across a term called "Utilization Rate" which seems to mean that the higher my percentage of unused available credit, the better for my credit rating. Now as I only have a credit limit of £300, should I pay off my balance regularly (every £100 I spend) meaning I can use it throughout the month, or should I use up the £300, then carry on spending on my debit card and pay the full £300 at the end of the month.

I don't need a credit card as I wage covers all my spending and I have savings, I only have it to improve my credit rating, so I want to use it in the most effective way possible to do this.

InsideInsurance

Are you actually wanting to apply for more credit in the near future?

Ideally you want the utilisation as under 50% but you've two options, reduce the amount your spending/ pay it off or get more lines of credit so that it drives the number down.

CLAPTON

in any event keep your spending with at least a £100 short of the limit in case of mistakes / emergencies etc.

samma90

I would like more credit but the provider(aqua) said they would reasses in 6 months. I choose aqua as the card is great to use abroad and I go abroad often. Keeping the rate under 50% isn't too much of a problem, I just wanted to know if this will actually make a difference, I've read else where it should be below 30%. Mistakes and emergencies won't happen, I know this sound arrogant but I have savings for emergencies and I check my finances twice a week so as long as I'm aware of the best procedure to use my credit card then that's fine.

So would most others stick to the 30%~50% limit and then pay off the card or would anyone else just pay at the end of the month?

CLAPTON

samma90 wrote: »

I would like more credit but the provider(aqua) said they would reasses in 6 months. I choose aqua as the card is great to use abroad and I go abroad often. Keeping the rate under 50% isn't too much of a problem, I just wanted to know if this will actually make a difference, I've read else where it should be below 30%. Mistakes and emergencies won't happen, I know this sound arrogant but I have savings for emergencies and I check my finances twice a week so as long as I'm aware of the best procedure to use my credit card then that's fine.

So would most others stick to the 30%~50% limit and then pay off the card or would anyone else just pay at the end of the month?

when you apply for a credit the potential lender will use the data on your credit files:
each lender will have their own criteria : some will target 'excellent ' high income people and some will target poorer people with poorer credit histories and everything in between

so it is impossible to say the rule is true or false: all one can say it is makes sense and will do no harm.