Keep credit utilisation under 30%

• High credit card usage can lower your CIBIL score
• Experts advise keeping credit utilisation below 30 per cent
• Pay balances in full or request higher limits to improve scores

Your CIBIL score is a passport to your financial goals, from home loans to car financing. But a high credit card bill can hurt it, even if you pay on time. The key is a concept called credit utilisation, a powerful but often overlooked factor.

First, What Is a CIBIL Score?

Think of your CIBIL score as your financial report card. It's a three-digit number, ranging from 300 to 900, that summarises your credit history. Lenders like banks and financial institutions use this score to judge your creditworthiness—in simple terms, how likely you are to repay a loan. A higher score signals that you are a responsible borrower, which can lead to quicker loan approvals and better interest rates. This score is calculated by TransUnion CIBIL based on information provided by lenders about your loans and credit cards.

Demystifying Credit Utilisation Ratio (CUR)

One of the most significant factors influencing your CIBIL score is your Credit Utilisation Ratio, or CUR. This ratio measures the percentage of your total available credit that you are currently using. The calculation is simple: divide your total outstanding balance on all your credit cards by your total credit limit, and then multiply by 100. For example, if you have two credit cards with a combined limit of ₹1,00,000 and your outstanding balances total ₹25,000, your CUR is 25%. It's calculated on your overall limit, not just on a per-card basis.

The Magic Number: Why 30%?

Financial experts and credit bureaus consistently advise keeping your CUR below 30%. This isn't an arbitrary number. A ratio above 30% can start to negatively affect your CIBIL score. Lenders view a high CUR as a sign of 'credit-hungry' behaviour, suggesting you might be overly reliant on credit to manage your finances. This can be interpreted as a signal of financial distress, making you appear as a higher-risk borrower, even if you’ve never missed a payment. Conversely, a low CUR demonstrates responsible credit management and financial discipline.

Practical Steps to Lower Your Utilisation

Managing your CUR is an active process. Here are a few proven strategies to keep it in the healthy range: Pay your balance in full each month. This is the most effective way to keep your utilisation low and avoid interest charges. Make multiple payments a month. You don't have to wait for your bill. Making payments throughout the month can keep your reported balance down. Ask for a credit limit increase. If your spending stays the same but your limit goes up, your utilisation ratio automatically drops. You can contact your card issuer to request this, especially if you have a good payment history. Spread your spending. If you have multiple cards, distribute your purchases across them instead of maxing out a single card. This helps keep the individual card utilisation low as well as the overall ratio.

More Than Just One Number

While CUR is a major factor, making up about 30% of your score, it's not the only thing that matters. Your payment history is the single most important element, accounting for roughly 35%. Consistently paying your bills on time, every time, is fundamental to a good score. Other factors include the length of your credit history (longer is better), your credit mix (a healthy blend of secured loans like home loans and unsecured loans like credit cards), and the number of recent credit inquiries (too many applications in a short time can lower your score).