Utilisation Ratio

sultanoflondon

Hi team,

Don’t think I’ve seen a consensus answer to this: how much of your limit should you use on a given card (0% on purchases, or Balance Transfer, or Money Transfer)? I’ve heard 50%, a third, or even the full 90-95%.

Assume that don’t want to decimate my credit score, and that I will need to apply for new cards within the next 6-12 months.

Cheers & Merry Christmas all!

MyRealNameToo

sultanoflondon said:

Hi team,

Don’t think I’ve seen a consensus answer to this: how much of your limit should you use on a given card (0% on purchases, or Balance Transfer, or Money Transfer)? I’ve heard 50%, a third, or even the full 90-95%.

Assume that don’t want to decimate my credit score, and that I will need to apply for new cards within the next 6-12 months.

Cheers & Merry Christmas all!

Lenders dont see credit scores, they're something made up by the Marketing Department of the CRAs, but instead get your credit history and make their own decisions based on that. Each firm can come up with whatever logic they feel is right and so there is a no single universal answer and hence when the same person applies to multiple lenders they get different responses. 

Some may not consider anything on a 0% balance, others may consider it. Certainly from an affordability perspective they should be considering your currently available capacity and how affordable it would be for you if you went on a splurge. They may also see a recent increase in outstanding balances more of a worry than an older one that you have been steadily paying down. 

Historically, especially when they predominately issued charge cards, AmEx used to be one that disliked standing balances whereas clearly MBNA have a more liberal approach given the size of the limit they provided to me with an outstanding balance. 

kempiejon

In my stable cards of I have some with zero balances, biding their time for a repeat offer, others 90% occasionally a touch more as when I'm using the CC's capital, interest free and for my own furtherment I want to use as much as possible. And all amounts in between, I have a pair spending cards that I clear every month, 3 with stoozed balances and another handful with zero.
As mentioned I doubt there's a rule as to what is best, it's history of good payment management and whatever risks and customer profils the issuer is looking at.

ZeroSum

My approach is to pretty much spend upto 90% then stop spending, and apply for new one.
Remember if only spending upto 50% youll be applying more frequently which isnt a good thing either.

sultanoflondon

MyRealNameToo said:

sultanoflondon said:

Hi team,

Don’t think I’ve seen a consensus answer to this: how much of your limit should you use on a given card (0% on purchases, or Balance Transfer, or Money Transfer)? I’ve heard 50%, a third, or even the full 90-95%.

Assume that don’t want to decimate my credit score, and that I will need to apply for new cards within the next 6-12 months.

Cheers & Merry Christmas all!

Lenders dont see credit scores, they're something made up by the Marketing Department of the CRAs, but instead get your credit history and make their own decisions based on that. Each firm can come up with whatever logic they feel is right and so there is a no single universal answer and hence when the same person applies to multiple lenders they get different responses. 

Some may not consider anything on a 0% balance, others may consider it. Certainly from an affordability perspective they should be considering your currently available capacity and how affordable it would be for you if you went on a splurge. They may also see a recent increase in outstanding balances more of a worry than an older one that you have been steadily paying down. 

Historically, especially when they predominately issued charge cards, AmEx used to be one that disliked standing balances whereas clearly MBNA have a more liberal approach given the size of the limit they provided to me with an outstanding balance. 

Thanks! Interesting that this has been the case for you, since for me, Lloyds has been the best offer for a long, long time for me, as reflected in my limit, rolled from one card to the next, for a few years now.

sultanoflondon

kempiejon said:

In my stable cards of I have some with zero balances, biding their time for a repeat offer, others 90% occasionally a touch more as when I'm using the CC's capital, interest free and for my own furtherment I want to use as much as possible. And all amounts in between, I have a pair spending cards that I clear every month, 3 with stoozed balances and another handful with zero.
As mentioned I doubt there's a rule as to what is best, it's history of good payment management and whatever risks and customer profils the issuer is looking at.

Interesting… and you haven’t found that having a card with 90% utilised has affected your ability to get more 0% Purchases / BT offers?

sultanoflondon

ZeroSum said:

My approach is to pretty much spend upto 90% then stop spending, and apply for new one.
Remember if only spending upto 50% youll be applying more frequently which isnt a good thing either.

Thanks! Hasn’t several cards with 90% utilised harmed your ability to get subsequent 0% Purchases / BT offers? I would have thought so, but please correct me if I’m wrong.

Good point on frequency. I was using up to one-third on each card, and the frequency was getting out of hand, and so I’m considering increasing my utilisation ratio across cards, which prompted this thread.

Another point that someone raised to me is that lenders have to hold capital against credit limits, even if unused, and so large unused credit limits are loss-making business for them. Someone with a tonne of unused limit could be seen unfavourably.

Overall, I’m inclined to use up to 89.9% on some cards, with an average across all cards of c. 50-60%. That feels sensible to me, but please do challenge me!

Jami74

I have 3 balance transfer cards maxed out. An Amex and couple of small limit cards for regular spending and paying off in full each month. And have just closed 3 cards in the hope of getting another big balance transfer card in a couple of months.

I ignore the utilisation ratios, occasionally I have to pay a card off and close it before I can open another one but often I can roll the debt onto another fee free 0% card.

ZeroSum

sultanoflondon said:

ZeroSum said:

My approach is to pretty much spend upto 90% then stop spending, and apply for new one.
Remember if only spending upto 50% youll be applying more frequently which isnt a good thing either.

Thanks! Hasn’t several cards with 90% utilised harmed your ability to get subsequent 0% Purchases / BT offers? I would have thought so, but please correct me if I’m wrong.

Good point on frequency. I was using up to one-third on each card, and the frequency was getting out of hand, and so I’m considering increasing my utilisation ratio across cards, which prompted this thread.

Another point that someone raised to me is that lenders have to hold capital against credit limits, even if unused, and so large unused credit limits are loss-making business for them. Someone with a tonne of unused limit could be seen unfavourably.

Overall, I’m inclined to use up to 89.9% on some cards, with an average across all cards of c. 50-60%. That feels sensible to me, but please do challenge me!

By the time a 2nd card gets to 90% the first card has dropped down to about 60-70% so never really have loads of cards with high utilisation. Across the board it'll work out at around the 50% average. I tend not to leave unused cards. Once the 0% has ended & balance clears, I just cancel them

martinbainbridge1975

I use to find it easier to get deals when I owed a chunk on several credit cards.

The credit score is a made up number, the lenders will no doubt have their own internal scoring criteria.

hugheskevi

Over the last 15 years of Stoozing, I have found that utilisation rate makes little to no difference to offers. It has been total balance across all cards compared to gross salary which seems to be the limiting factor, with very little available once debt to salary ratio rises above 50%.

As an example, my wife has just got over £20K of new fee-free balance transfers offered to her along with a 0% purchases card after paying off an expiring balance transfer card a month or two ago. At the time of applications, she had 4 credit cards all with 0% interest, with utilisation rates of 72%, 78%, 86%, and 93%.

Personally, I keep utilisation below 95%, that is all.