2. Using Too Much of Your Credit Limit
Another common mistake that damages credit scores in the UK is using too much of the available credit limit on a credit card.
This concept is known as credit utilisation, which refers to the percentage of available credit that a person is currently using. Lenders closely monitor this figure because it helps them understand how dependent someone is on borrowed money.
For example, if someone has a credit card limit of £5,000 and carries a balance of £4,000, they are using 80 percent of their available credit. Even if they make payments on time, such high utilisation can signal financial pressure to lenders.
A borrower who consistently uses most of their credit limit may appear to be struggling with cash flow or relying too heavily on credit to manage everyday expenses.
Financial experts in the UK often recommend keeping credit utilisation below 30 percent of the available limit. This means that someone with a £5,000 credit card limit should ideally keep their balance below £1,500 whenever possible.
Maintaining a lower balance shows lenders that the borrower is in control of their finances and is not overly dependent on credit.
One simple way to improve credit utilisation is to make payments more frequently, rather than waiting until the end of the month.
Another option is requesting a credit limit increase, provided spending habits remain the same. A higher limit combined with responsible spending can reduce the utilisation percentage and help improve the overall credit profile over time.
