How to Calculate Your Credit Utilisation Ratio

Your credit usage ratio is a percentage that reflects your total revolving account balances against your total available credit. It's a key credit score component. That’s why knowing how credit utilisation ratio is calculated and, more importantly, how to accurately calculate your own credit utilisation rate is essential to stay on top of your finances.

The "30% rule" suggests keeping credit card balances below 30% of credit limits. This guideline evolved from credit scoring models that identified this threshold as indicative of responsible credit management and lower risk. By staying within this limit, you demonstrate financial prudence.

In Singapore, banks like DBS, OCBC, and UOB use credit scores from Credit Bureau Singapore (CBS) to assess your creditworthiness, ensuring they lend responsibly. The CBS is a credit bureau that compiles and provides credit information on consumers in Singapore, aiding financial institutions in making informed lending decisions.

100% credit usage occurs when you've maxed out all available credit. This severely impacts your credit score, indicating potential financial distress and high risk to lenders. High usage signals financial strain to lenders, potentially leading to higher interest rates or outright loan refusals, as it suggests an inability to manage debt.

You never want to reach this point, which is why it's crucial to know how to calculate credit utilisation ratio and consistently track your usage.

>> READ MORE: How many credit cards should I have in Singapore?

You can determine your credit usage using these steps:

1. Sum all credit card balances (outstanding amounts on your cards)

2. Sum all credit card limits.

3. Divide total balances by total limits.

4. Multiply by 100 to get a percentage.

To make things easier, take this example:
Card 1 Balance: $800, Limit: $3,000
Card 2 Balance: $200, Limit: $1,000
Total Balance: $1,000, Total Limit: $4,000

Ratio: ($1,000 / $4,000) * 100 = 25%

Credit usage is measured per-card and overall. Per-card usage shows individual card usage, while overall usage combines all cards. If you’re confused about your current credit utilisation, use our calculator below.

Input balances and credit limits for up to three credit cards to see per-card and overall usage.

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Overall usage reflects your total credit burden, showing your cumulative debt across all cards. Meanwhile, per-card usage shows your management of individual credit lines, indicating how well you handle each credit account.

Lenders consider per-card and overall credit utilisation ratio, as they provide a comprehensive view of your credit habits and risk level, assessing both your total debt and individual card management. If you consistently maintain low utilisation rates across all your credit cards, it signals responsible financial behavior and reduces the perceived risk to lenders. Hence, both are equally important.

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As mentioned above, credit usage directly impacts your credit score in Singapore. CBS compiles credit reports, accessible online with Singpass. These reports detail your credit history, including payment habits and credit usage.

CBS offers paid reports, and select banks provide free reports based on eligibility, allowing you to understand and manage your credit effectively. This is a valuable resource if you're unsure about how to calculate credit utilisation ratio but need to know your ratio, especially when preparing for a loan application.

Aside from knowing how to calculate your credit utilisation ratio to stay informed, there are many things you can do to keep your credit utilisation low. However, consistent effort and proactive management are key. Here are several effective strategies:

• Make frequent payments throughout the month to reduce your reported balance. Paying small amounts weekly can lower your reported usage, reflecting better financial management and reducing the overall reported credit burden.

• Set credit card alerts for when you approach your usage limit. Alerts can notify you when you reach 30% usage, helping you manage spending and avoid over-utilisation. This allows for timely adjustments to spending habits.

• Request a higher credit limit. Increasing your limit provides a buffer, effectively lowering your utilisation percentage. In Singapore, you can easily apply for higher limits via online banking or mobile apps, offering convenient access to increased credit lines.