Explore top LinkedIn content from expert professionals.
Summary
Understanding credit utilization means knowing how much of your approved credit you are currently using—it’s a key factor in calculating your credit score. Keeping your credit utilization ratio low shows lenders you are not overly reliant on borrowed money, which can help you qualify for loans and credit cards more easily.
Monitor usage: Aim to use less than 30% of your total credit limit to maintain a healthy credit score.
Request increases: Consider asking your bank or credit card provider for a higher credit limit to improve your utilization ratio without increasing your actual spending.
Maintain discipline: Pay off balances on time and avoid unnecessary purchases so your credit usage stays manageable and your score remains strong.
I had a credit card with a ₹3 lakh limit. I was eligible for ₹10 lakhs. But I never upgraded. Why? Because I didn’t want to overshoot, even accidentally. Because I told myself - “Why tempt yourself unnecessarily?” I thought I was playing it safe. Until I learnt—I was missing out on a key point. Let me explain. Recently, I came across a crucial insight while reviewing credit behavior metrics: Credit utilization has a disproportionate impact on your credit score. Your CIBIL score doesn’t just care about how regularly you pay. It also cares about how much you use, relative to what you’re allowed. So if my card limit is ₹3L, and I spend ₹1.5L monthly -That’s a 50% utilization rate. And 50% is high. That’s a red flag. Now, if I increase my limit to ₹10L and still spend ₹1.5L. That’s just 15% utilization. Suddenly, my discipline now looks like prudence. My behavior hasn’t changed. My optics have. The takeaway? This isn't about spending more. It’s about understanding how systems read you. So yes, Increase your credit limit if you’re eligible. Not to spend more. But to look smarter. Just sometimes, perception does matter :) #SpendSmart#CIBILScore#MoneyMatters
Want a better credit score? Here’s an easy way to boost it The second biggest factor in your credit score is utilization. This means how much credit you’re actually using compared to what’s been approved. For a credit card, if you have a $1,000 credit limit and a balance of $500, you have a 50% utilization. You shouldn’t go above 30% for a good credit score. You shouldn’t go above 10% for an excellent credit score. If you manage your credit cards wisely by: Paying them off on time every single month Paying them off in full every single month Never buying something for ‘the points’ and only using credit to purchase what you’d already be buying Then the easiest way to lower your utilization is to increase your credit limit Keeping a utilization below 10% can be hard if you have a $1,000 limit With a $10,000 limit, it’s much easier Most people think you have to wait for the credit card company to offer you an increase In reality, you don’t have to wait Call them & ask Request an increase via their app Set a reminder to do this every 6 months It’s an easy way to increase your credit score If you aren’t doing the three things I stated above, do that for six months minimum before doing anything else I said
How is your CIBIL Score Calculated? CIBIL (Credit Information Bureau (India) Limited) Score is a three-digit number ranging from 300 to 900, representing an individual's creditworthiness. It is generated based on credit history, borrowing behavior, and repayment patterns. A higher score (closer to 900) indicates better credit health, increasing the chances of loan and credit approvals. The calculation of a CIBIL Score is based on multiple factors, each contributing a specific percentage to the final score. 1. Payment History (35%) The most significant factor influencing the CIBIL Score is timely repayment of loans and credit card bills. Delays, defaults, or missed payments negatively impact the score, whereas consistent on-time payments improve it. Even a single missed EMI can lower the score significantly. 2. Credit Utilization Ratio (30%) Credit utilization refers to how much of the sanctioned credit limit is being used. A high credit utilization ratio (above 30% of the available limit) indicates dependency on credit, which can lower the score. Keeping the utilization ratio below 30% is ideal for maintaining a high score. 3. Credit Mix (10%) A diverse mix of credit—such as secured loans (home loans, auto loans) and unsecured loans (personal loans, credit cards)—contributes positively to the score. A balanced combination of both types of credit indicates responsible borrowing behavior. 4. Length of Credit History (15%) The duration for which an individual has been using credit also impacts the score. A longer and well-maintained credit history demonstrates financial discipline, positively affecting the score. Closing old credit accounts may reduce the score, as it shortens the credit history. 5. Number of Hard Inquiries (10%) Each time a person applies for a loan or credit card, lenders check their credit report, creating a hard inquiry. Too many hard inquiries within a short period indicate frequent credit-seeking behavior, which can lower the score. It is advisable to space out credit applications. Final Score Calculation CIBIL uses a complex proprietary algorithm that considers these factors to generate a score. While perfect scores are rare, a score above 750 is considered excellent and improves chances of loan approvals at better interest rates. How to Improve CIBIL Score Pay EMIs and credit card bills on time. Keep credit utilization below 30%. Maintain a mix of secured and unsecured credit. Avoid multiple credit inquiries in a short period. Keep old credit accounts open to build a long credit history. Maintaining a good CIBIL Score is essential for securing loans, better interest rates, and financial credibility. #cibil#loans#risk#banking#lending#strategy#credit