Credit utilisation is the share of available revolving credit that is currently being used, shown as a percentage. If card limits total 5,000 GBP and the balance is 1,000 GBP, utilisation is 20 percent, a figure lenders weigh when scoring applications.
In one line: Credit utilisation is how much of a credit limit is in use, expressed as a percentage that influences credit scoring.
How credit utilisation works
Utilisation is the total balance on revolving accounts divided by the total credit limit. It is calculated from the balances reported to the credit reference agencies, usually around each statement date.
Someone with two cards limited to 3,000 GBP and 2,000 GBP who owes 500 GBP in total has 10 percent utilisation. Lenders often view lower utilisation as a sign that credit is being managed comfortably.
Because the figure is taken on the reporting date, paying a balance down before that date can change the utilisation that appears on a credit file.
Common confusions
Utilisation measures revolving credit such as cards, not instalment loans with fixed repayments. A mortgage or car loan is treated separately on a credit file.
A high balance is not the same as a high utilisation; a large balance against a large limit can still be a low percentage, and it is the percentage that scoring tends to weigh.
Primary source: FCA / credit reference agency guidance