Credit Card Utilisation Ratio: What It Is and Why It Matters
If you’re applying for a loan, a new credit card, or even a rental agreement that checks CIBIL, your credit utilisation ratio is one of the biggest levers you can pull — and most Indians optimise it wrong.
What is credit utilisation ratio?
Credit utilisation = your total outstanding balance ÷ your total credit limit. It’s expressed as a percentage.
Example: you have two cards with ₹50,000 limit each (₹1L total) and your outstanding balance across both is ₹30,000. Your utilisation is 30%.
Why it matters
CIBIL weighs utilisation as ~30% of your credit score calculation — second only to payment history. A sustained high utilisation (>70%) can drop your score by 50–100 points over 6 months, even if you pay every bill on time.
The sweet spot
- Under 30%: ideal. Lenders see you as using credit responsibly with room to spare.
- 30–50%: acceptable but not optimal.
- 50–75%: score starts dropping.
- Above 75%: red flag for lenders. Avoid this except in emergencies.
How to lower utilisation fast
- Pay before the statement date. Your bank reports the outstanding on the statement date, not the due date. Pay down the balance before statement = lower reported utilisation.
- Request a limit increase. A ₹20,000 balance on a ₹50K limit = 40% utilisation. Same balance on a ₹1L limit = 20%. Ask for an increase every 9–12 months.
- Spread spend across cards. Don’t max one card. A ₹40K balance split across two ₹50K cards = 40% per card. Same total on one card = 80% utilisation.
- Don’t close old cards. Closing reduces your total available credit — pushing utilisation up even if your spend stayed the same.
The per-card utilisation trap
CIBIL also looks at utilisation PER CARD. If your overall utilisation is 25% but one card is at 95%, the high card still drops your score. Balance across cards.
What doesn’t affect utilisation
- Your reward points earned
- Paying the minimum vs. full bill (both reduce utilisation if paid before next statement)
- Debit card transactions (don’t count — no credit involved)
This is independent commentary, not financial advice.