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Credit Utilisation Ratio — The Hidden Score Killer Most Indians Overlook
It is not just about paying on time. How much of your available credit you use is equally important.
Ask most people what affects their credit score and they will say 'paying on time.' Correct — but incomplete. The second-largest factor in your credit score is credit utilisation: the ratio of how much credit you are using to how much credit you have available. And most Indians are unknowingly damaging their scores through this factor every single month.
What credit utilisation ratio is
Credit utilisation ratio = (Total credit used) ÷ (Total credit limit available) × 100. If you have a ₹1 lakh credit card limit and your current balance is ₹60,000, your utilisation ratio is 60%. Credit bureaus consider a ratio above 30–35% as a risk signal. Above 50% is significantly negative. Above 70% can severely damage your score — even if every payment is made on time.
| Utilisation Ratio | Impact on Score |
|---|---|
| Below 10% | Excellent — very positive signal |
| 10–30% | Good — healthy credit use |
| 30–50% | Moderate — marginal negative |
| 50–70% | Poor — meaningful score reduction |
| Above 70% | Very poor — significant score damage |
A marketing manager routinely charged ₹40,000–₹50,000 on her ₹60,000 limit credit card every month — and paid it in full every time. She was meticulous. Her CIBIL score was 685 — much lower than she expected. When she checked her report, the utilisation was consistently showing 70–80% (because the bureau captures the balance at statement date, before she paid). She requested a credit limit increase to ₹1.5 lakh. Utilisation dropped to 30%. Within 4 months, her score crossed 750.
Practical ways to manage utilisation
- Pay mid-cycle — before the statement date — to ensure a lower balance is reported to the bureau.
- Request a credit limit increase — if your spending habits are responsible, a higher limit automatically reduces utilisation.
- Spread spending across two cards — if you have multiple cards, distributed use keeps individual utilisation low.
- Do not close old cards — they contribute to your total available credit, keeping the denominator high.
Utilisation is the one credit score factor you can change fastest. It updates every billing cycle. Bring it below 30% — through payment timing, limit increases, or distributing spend — and you can see score improvement within 60–90 days.
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