Credit Utilisation Ratio

Full form: CUR

Credit

Credit utilisation ratio is the percentage of your total available credit limit that you are currently using. It is the second most important factor in your CIBIL score after payment history. Keep it below 30% -- ideally below 10% -- for the best score impact.

In detail

CUR score impact:nBelow 10%: excellent, maximum positive impactn10-30%: goodn30-50%: moderate, begins to hurt scoren50-75%: significant negative impactnAbove 75%: severe negative impactnnHow to lower CUR:n1. Pay credit card bill before due date (reduces reported balance)n2. Pay twice a month (reduces average balance reported)n3. Request credit limit increase without increasing spendingn4. Open another credit card (increases total limit, spreading same usage)n5. Distribute spending across multiple cards

Formula

Credit utilisation = (Total outstanding / Total credit limit) x 100nExample: Rs 25,000 outstanding across cards with Rs 1,00,000 total limit = 25% utilisation

Real-life example

🇮🇳 India example

Anita has one credit card with Rs 50,000 limit, usually charges Rs 22,000/month = 44% utilisation. Score: 685. She gets a second card with Rs 40,000 limit. Now total limit: Rs 90,000, same spending Rs 22,000 = 24.4% utilisation. Score improves to 730 within 2 months -- just from better utilisation, no other change.

Frequently asked questions

Does closing old credit cards hurt my credit score? ▼

Yes on two dimensions: (1) Reduces total credit limit, increasing utilisation ratio, (2) Reduces average account age. Keep old cards open, even if unused. Use them for a small transaction every 6 months to prevent the bank from cancelling them for inactivity.