Are you using too much of your credit card limit? Your credit score notices

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• Credit utilisation shows how much of your credit limit you use
• High credit usage can lower your score despite timely payments
• Keeping utilisation below 30 percent is generally recommended

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A lot of people assume their credit score depends on just one thing: paying bills on time. That’s partly true. But there’s another number quietly sitting in the background that lenders pay close attention to. It’s called credit utilisation. Put simply, it tells lenders how much of your available credit you are actually using. And if that number is consistently high, your credit score can slip even when you never miss a payment.

What credit utilisation really means

Think of your credit card limit as the space available to borrow. Credit utilisation measures how much of that space you are using.

Say your credit card limit is Rs 1 lakh. If your bill shows Rs 25,000 outstanding, your utilisation is 25 percent. If the balance climbs to Rs 85,000, your utilisation jumps to 85 percent.

From a lender’s point of view, someone who regularly uses most of their limit looks more financially stretched than someone who only uses a small portion.

Why lenders get uneasy when the number is high

Imagine two people with the same income and the same credit card limit. One usually spends about Rs 20,000 a month. The other constantly runs up bills of Rs 80,000 or Rs 90,000.

Both may pay on time. But the second borrower appears to be relying far more heavily on credit to get through the month. That makes lenders slightly nervous, because it suggests there is less room to handle unexpected expenses.

That is why credit scoring models quietly penalise consistently high utilisation.

The 30 percent idea you may have heard about

You may have heard people say you should keep your credit utilisation below 30 percent. It is not a rigid rule, but it is a useful guide.

If your credit limit is Rs 1 lakh, lenders are generally more comfortable seeing balances of around Rs 30,000 rather than Rs 80,000 or Rs 90,000 month after month.

Using a higher amount occasionally is not a disaster. What matters is the pattern over time.

Why some people are surprised when their score drops

Here’s a situation that catches many people off guard. You spend Rs 80,000 on a card with a Rs 1 lakh limit. The statement gets generated with that balance. A week later, you pay the bill in full.

From your perspective, you did everything right. But the credit bureau only sees the Rs 80,000 balance that was reported when the statement closed. That translates into 80 percent utilisation for that month.

If this happens frequently, your score can slowly drift downward.

A few simple ways to keep it under control

Some people make a partial payment before the billing cycle closes so the reported balance stays lower. Others spread spending across two cards instead of putting everything on one.

Another option, once your income and repayment history improve, is asking the bank for a higher credit limit. If your spending stays the same but the limit increases, your utilisation automatically drops.

The bottom line

Credit utilisation is easy to ignore because it sits quietly behind the scenes. But lenders watch it closely. Running close to your credit limit month after month sends a signal that you may be depending heavily on credit.

Leaving some breathing room between your spending and your credit limit can make your credit profile look far stronger when you apply for a loan later.