Credit Utilisation

Credit utilisation ratio measures how much of your total available credit you're currently using, calculated as your outstanding balance divided by your credit limit. It's one of the most heavily weighted factors in most credit scoring models, including CIBIL in India, second only to payment history in typical impact on your score.

Keeping utilisation below 30% of your total sanctioned credit limit across all cards is a widely cited guideline, though lower is generally better still. As debt gets paid down through a structured plan, utilisation naturally falls, directly and often quickly improving credit score alongside the reduced balances themselves.

Credit Utilisation (%) = (Total Outstanding Balance / Total Credit Limit) × 100

Someone has three credit cards with a combined limit of ₹3,00,000, and current outstanding balances totaling ₹1,20,000.

• Credit utilisation: (₹1,20,000 / ₹3,00,000) × 100 = 40%

This exceeds the commonly recommended 30% threshold, paying down the balance to ₹90,000 or below would bring utilisation to 30% or under, a meaningful lever for improving credit score independent of payment history.

• Both overall and per-card utilisation matter to credit bureaus. A high balance on a single card can hurt your score even if your combined utilisation across all cards looks reasonable.
• Statement balance, not real-time balance, is usually what's reported. Paying off a card in full before the due date doesn't always mean zero reported utilisation, since the statement often closes with a balance before payment.
• One of the fastest-moving factors in credit scoring. Unlike payment history, which builds over years, utilisation can shift your score within one or two reporting cycles as balances change.
• Closing old cards can raise utilisation, even without new spending. Reducing your total available credit limit by closing a card mechanically raises your ratio if balances stay the same.
• Below 30% is a common target, but lower generally scores better still. There's no hard cliff at exactly 30%, utilisation in the single digits to low teens is often viewed even more favorably by scoring models.