High credit utilization: Does this affect your credit rating? We explain this here | Mint

The ideal credit consumption ratio is 30 percent above where your creditworthiness tends to suffer if you spend too high on your credit limit, your credit rating tends to suffer. If you have recently started using a credit card, you should be aware that it has a fixed credit limit, and you are not supposed to spend above. Although the limit is typically generous, it is recommended not to take it all out for the sake of a healthy creditworthiness. The users who exhaust their entire limit do not realize that it has a negative effect on their creditworthiness. What is the credit consumption ratio? The ratio of credit used by the total credit limit is referred to as credit consumption ratio (CUR). Lower the relationship, the better it is for creditworthiness, and higher the relationship, it is worse for your creditworthiness. For example, if the limit of your credit card is £ 10 lakh and your £ 7 lakh spent, your credit consumption ratio (CUR) would be 70 percent. What is the ideal relationship between credit use? However, the ideal relationship is 30 percent. This means from your total credit limit; A cardholder is supposed to spend only 30 percent of it so that it does not affect your creditworthiness in any adverse way. A high CUR can negatively affect your credit rating, making it more difficult for the borrowers to obtain a loan or to attract favorable interest rates. What is the way to combat its impact? A cardholder can hold more than one credit card so that she does not have to spend more than 30 percent on any of these cards. For example, if you have two cards with £ 5 lakh each, instead of spending £ 5 lakh of one card, you can spend £ 2.4 lakh of each. This way, your credit utilization remains 50 percent. Although it is still above the ideal 30 percent threshold, it is still better than 100 percent. Disclaimer: Mint has a fusion with fintechs to provide credit, you must share your information if you apply. These bonds do not affect our editorial content. This article only intends to educate and distribute awareness about credit needs such as loans, credit cards and creditworthiness. Mint does not promote or encourage credit as it has a set of risks such as high interest rates, hidden costs, etc. The control of your creditworthiness is absolutely first published: 9 Apr 2025, 05:27 IST