Understanding the 'Secret Number' in Your Credit Profile

When it comes to borrowing money, most people focus on their credit score. But finance experts warn there's another 'secret number' that can be just as important—your credit utilisation ratio. This figure, expressed as a percentage, shows how much of your available credit you’re using. If it’s too high, lenders may view you as a risky borrower, even if your score is decent.

Why It Matters More Than You Think

According to Tynah Matembe, founder of Money Matix, many applicants are rejected for mortgages or credit cards because of this ratio. For example, if you have a £5,000 credit limit and consistently carry £3,000 in debt, your utilisation rate is 60%—well above the safe zone. Ideally, you should aim to keep this number below 30%.

Other Hidden Factors Affecting Loan Approval

While the credit utilisation rate is a key figure, lenders also consider payment history, length of credit history, and the number of recent credit applications. Multiple applications in a short period can make you seem desperate for credit, reducing your chances of approval.

How to Improve Your Chances

Experts recommend paying down balances before applying for new credit, requesting credit limit increases (without using the extra credit), and avoiding large purchases right before your application. Small adjustments can significantly reduce your utilisation percentage and boost your approval odds.

Fun Fact for Trivia Lovers

Did you know? Credit utilisation accounts for about 30% of your overall credit score calculation. That means lowering it could have an immediate positive impact!

Source: Mirror