Credit scores
What Is Credit Utilization in Canada?
Credit utilization is how much of your available credit you are using, and it is one of the biggest factors in your credit score. How to calculate it and how to keep it low.
What is credit utilization?
The share of your revolving credit limits that you are using, such as credit cards and lines of credit. If you have $10,000 of limits and $2,500 of balances, your utilization is 25%.
| Total limits | Reported balances | Utilization |
|---|---|---|
| Top$10,000 | $500 | 5% |
| $10,000 | $2,500 | 25% |
| $10,000 | $5,000 | 50% |
| $10,000 | $9,000 | 90% |
It is calculated from the balances your lenders report to Equifax and TransUnion, usually the balance on your statement, not what you owe on a given day.
Put it into practiceDoes closing a card hurt your credit score?What is a good credit utilization ratio?
Under 30% is the common guideline, and under 10% is typical of the highest scores. Lenders also look at each card individually, so a single card near its limit can hurt even if your total is low.
How can I lower my utilization quickly?
Pay down balances before the statement closes, make a mid-cycle payment, or ask for a higher limit on a card you already have.
Because utilization is based on reported balances, it changes every month. Lowering it usually shows up in your score within one or two reporting cycles.
Is 0% utilization best?
Not necessarily. Using a card lightly and paying it in full each month shows lenders you use credit responsibly. A small reported balance that you pay off is fine.
Does closing a card affect utilization?
Yes. Closing a card removes its limit, so the same balances become a larger share of your credit. That is the main reason closing a card can lower your score.
Keep reading
Credit scoresWhat Is a Good Credit Score in Canada?Canadian credit score ranges explained (300 to 900), what lenders consider good, and how long information stays on your Equifax and TransUnion reports.- Credit scoresHow to Improve Your Credit Score in CanadaNine steps that raise a Canadian credit score, in order of impact, with how long each takes to show up.
Credit scoresHow to Increase Your Credit Limit in CanadaHow to ask for a higher credit card limit in Canada, what issuers look at, whether it affects your credit score, and why your bank needs your consent for every increase.- Credit scoresWhy Did My Credit Score Drop? 7 Common Reasons in CanadaThe seven usual reasons a Canadian credit score falls, from a higher card balance to a missed payment or an error on your report, and what to do about each.
Official sources and further reading
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