Credit Limit

Credit

Credit limit is the maximum amount you can borrow on a credit card or credit line. Keeping your utilisation below 30% of your total credit limit is critical for maintaining a good CIBIL score.

In detail

Credit utilisation ratio = Total outstanding / Total credit limit x 100. Below 30%: good. 30-60%: moderate impact. Above 60%: significantly hurts CIBIL score.nnStrategy to improve score: request credit limit increase (without increasing spending) -- this instantly lowers utilisation ratio. Or pay credit card bill twice a month (before and on due date) to keep reported balance low.

Formula

Credit utilisation = (Total outstanding balance / Total credit limit) x 100nTarget: below 30%

Real-life example

🇮🇳 India example

Priya has 2 credit cards with Rs 1L and Rs 50K limits. Total limit: Rs 1.5L. Outstanding: Rs 60K. Utilisation = 40% -- too high. She requests limit increase to Rs 2L on card 1. New utilisation: Rs 60K / Rs 2.5L = 24%. CIBIL score improves by approximately 15-20 points.

Frequently asked questions

Does requesting a credit limit increase hurt my CIBIL score? ▼

Temporarily, by a few points (lender does a hard inquiry). But the long-term benefit of lower utilisation ratio outweighs the short-term dip, especially if you wait 6+ months between limit increase requests.