Key takeaways
- Utilization = your total balances ÷ your total credit limits
- The Financial Consumer Agency of Canada suggests using less than 30% of your limit
- This is a guideline, not a rule: the bureaus do not publish their exact formulas
- The balance on your statement is usually what gets reported
- Payment history matters even more: always pay on time
What is credit utilization?
Your credit utilization ratio is the share of your revolving credit (credit cards and lines of credit) that you are using. If your limits add up to $3,000 and you owe $1,200, your utilization is 40%.
Canada has two credit bureaus, Equifax and TransUnion. Their scores usually range from 300 to 900. FCAC lists using a lot of your available credit as one of the habits that can lower your score, along with missed payments and many new credit applications.
Is 30% a rule?
No. The Financial Consumer Agency of Canada advises: try to use less than 30% of your total credit limit. Equifax and TransUnion do not publish their scoring formulas, so there is no exact cut-off where your score changes. In general, lower is better, and many people with high scores use less than 10%.
Utilization has no memory in most scoring models: once your reported balance drops, your score can recover within a month or two. Missed payments stay on your report for years.
Which balance counts?
Your card issuer usually reports your balance to the bureaus once a month, often on or near your statement date. That means you can pay your card in full every month and still show high utilization, if the statement balance is high.
Tip: make a payment a few days before your statement date. Then a lower balance is reported, and you still pay the rest by the due date.
Worked example
Sofia has a new $1,000 secured card with a $900 balance and a $2,000 card with a $300 balance. Her total utilization is $1,200 ÷ $3,000 = 40%, and her first card is at 90%. Paying $300 before the statement date brings her total to 30%. Paying $900 brings it to 10%.
Other things that affect your credit score
Utilization is only one part. FCAC lists your payment history as the most important part of your score. Other factors include how long you have had credit, the types of credit you use, collections or bankruptcy, and how often you apply for new credit. Check your credit report for free from Equifax and TransUnion at least once a year and dispute any errors.
Newcomers: small limits fill up fast
First cards for newcomers often have limits of $500 to $2,000, and secured cards are limited to your deposit. A single grocery and phone bill month can push you over 30%. Ways to keep utilization low:
- Pay the card off every week or two, not just once a month.
- After 6 to 12 months of on-time payments, ask for a higher limit.
- Do not close your oldest card: it adds to your limit and your history.
Read more in building credit from zero, compare secured credit cards, and see the credit score builder. If you already carry a balance, plan it with the credit card payoff calculator.