Your credit utilization ratio is the share of your available revolving credit that you are actually using, and in Canada it is worked out from the balances and limits on your credit cards and lines of credit. It affects your credit score, your borrowing options, and the credit file of anyone who co-signs with you.

Your credit utilization ratio is the share of your available revolving credit that you are actually using. In Canada it is calculated by dividing the balances reported on your credit cards and lines of credit by their combined limits, and it is one of the most closely watched figures on a credit report — for you, and for anyone who co-signs a loan with you.

Only revolving accounts count toward the ratio: credit cards and lines of credit, where you can borrow, repay and borrow again. Instalment debt — a car loan, a student loan, a personal instalment loan or a mortgage — has a fixed repayment schedule, so scoring models treat it separately. That distinction explains why a loan you co-signed can appear on your credit file without visibly moving your utilization number.

Account type	Balance	Limit	Individual utilization
Credit card A	$600	$2,000	30%
Credit card B	$1,450	$5,000	29%
Line of credit	$4,000	$10,000	40%
Combined	$6,050	$17,000	About 36%

The formula is simple: total reported balances divided by total available limits, multiplied by 100. In the table above, $6,050 ÷ $17,000 works out to roughly 36%. Most scoring models look at the overall ratio and at the ratio on each individual account.

How the credit utilization ratio is calculated

Three details decide which number a lender or a scoring model actually sees.

1. Revolving balances only. Credit cards and lines of credit supply the balances and limits used in the calculation. Instalment loans do not feed the utilization figure, even though their balances show up on your report and count as debt you owe.
2. Timing. Issuers generally report to Equifax Canada and TransUnion Canada about once a month, usually around your statement date rather than your payment due date. A balance that appears on the statement can still sit in the utilization figure even if you clear it in full a few days later.
3. Overall versus per-account. Your total balance across all revolving accounts is measured against your total limits, and each account is also measured on its own. A single card that sits close to its limit can stand out even when the combined ratio looks healthy.

Why credit utilization matters for your credit score

Equifax Canada and TransUnion Canada produce the credit scores most lenders in this country use. The weighting each bureau applies is proprietary, but how much of your available credit you use is consistently treated as a significant factor. The Financial Consumer Agency of Canada publishes material on credit reports and credit scores, including the factors that typically feed into a score, such as payment history and how much of your available credit you are using.

There is no legal ceiling and no regulated threshold. The often-quoted "keep it under 30%" line is a rule of thumb, not a rule. Lower reported balances relative to limits generally look better to a scoring model, and a maxed-out card looks worse — but the size of any penalty comes from a proprietary formula, not from a published cutoff.

Utilization also matters in decisions that never reach a score. Lenders reviewing an application for a mortgage, a car loan or a new line of credit look at how heavily you rely on existing credit. Someone using most of their available limit every month can look riskier than someone with the same income using a small fraction of it. The Financial Consumer Agency of Canada has general guidance on borrowing and on the information lenders must provide.

One useful feature: utilization has no memory in the way payment history does. A missed payment can sit on a report for years, but the utilization figure is a monthly snapshot. Paying balances down can change it within a reporting cycle or two.

Utilization on joint accounts and co-signed loans

A co-signer is not a bystander. When you co-sign, you take on the same legal obligation as the primary borrower, and the lender must give you specific information about the loan. The Financial Consumer Agency of Canada describes the disclosure rules that apply to joint borrowers, and the New Brunswick Financial and Consumer Services Commission publishes a plain-language guide to what co-signing involves.

What that means for utilization depends on the product:

• Joint credit card or jointly held line of credit. The account normally appears on both credit reports, with the same balance and the same limit. A high balance raises the utilization ratio of both people, even if only one of them does the spending.
• Co-signed instalment loan. The loan is typically reported on both files. It does not sit inside the revolving utilization calculation, but it is still debt attached to your name, and a missed payment can damage both credit histories.
• Co-signed revolving account. Where a lender allows co-signing on a line of credit or a credit card, the balance and limit can feed directly into the co-signer's utilization figure.

How co-signing changes the picture for both people

For the primary borrower, adding a co-signer usually does not change the ratio. The limit and the balance stay the same; what changes is the lender's willingness to approve and, often, the rate charged. Our guide to what a co-signer is walks through the roles in more detail.

For the co-signer, the effect can be larger. A new account appears on their report, an inquiry may be recorded, and the obligation counts toward the debt a future lender will consider. If the account is revolving, the co-signer's utilization can rise even though they never use the account. A co-signer whose ratio is already high may find that co-signing affects an application for their own credit — worth thinking through before signing.

There is also a practical asymmetry. A co-signer has no control over the balance on the account, but the balance affects their credit file. If the borrower runs a co-signed line of credit near its limit, the co-signer's reported utilization goes up with it.

Ways to lower the reported utilization ratio

Because the figure is a snapshot, small changes can show up fairly quickly.

1. Pay before the statement date, not just before the due date. The balance reported to the bureaus is usually the statement balance. Clearing it early can mean a lower figure is reported.
2. Target the card closest to its limit. Per-account ratios matter, so paying down the most heavily used card often does more than spreading a small payment across every account.
3. Ask about a limit increase. A higher limit lowers the ratio if spending stays flat. Lenders may run a credit check, and a higher limit only helps if it does not become extra spending room.
4. Think twice before closing an old card. Closing an account removes its limit from the calculation and can push the overall ratio up.
5. Consider reshaping revolving debt. Moving credit card balances to an instalment loan changes the debt's structure and can lower the revolving ratio, though it may add interest, fees and a new payment. Options for borrowers with weaker credit are covered in our page on bad credit loans, and a loan payment calculator can help compare the monthly cost before you commit.

Common mistakes that push your ratio up

• Assuming a co-signed loan has nothing to do with your credit file.
• Paying a card in full every month, but only after the statement is generated, so a high balance is reported month after month.
• Closing a paid-off card and losing its available limit.
• Opening several new accounts quickly to raise total limits, then spending on them.
• Watching only the combined ratio while one card sits near its limit.
• Treating 30% as a regulated cutoff rather than a rule of thumb.
• Co-signing without checking how the new obligation fits your own borrowing plans.

If you are weighing whether to co-sign, or wondering how a co-signed loan will look on your report, the goal is not to hit a magic number. It is to keep reported balances modest relative to your limits, and to understand exactly what you are signing before you sign it.