Spending the entire credit card limit every month? Know its big loss
Your credit utilization ratio has a direct impact on your credit score.
A CUR less than 30 percent means that your credit management is better.
You can increase the credit limit to keep your CUR low.
New Delhi. Credit cards have become a common need for everyone in the present times. Nowadays most people use it to manage their expenses. If you also use a credit card, then this question must have arisen in your mind that does using the full credit limit affect your credit score?
Your credit score depends on a number of factors, including the Credit Utilization Ratio (CUR). Credit utilization ratio means how much you use the credit limit of your credit card in a month. Your credit utilization ratio depends on how much you use your credit card. The more you use the credit card, the higher will be your credit utilization ratio.
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This is how CUR affects credit score
Suppose your credit card limit is Rs 5 lakh, out of which you have spent Rs 50 thousand, then your CUR will be 10 percent. Explain that a CUR less than 30 percent means that your credit management is better. This can improve your credit score. But if your CUR remains high for a long time, then it is understood that you spend more than necessary. This can affect your credit score.
This is how CUR can be kept low
You can increase the credit limit to keep your CUR low. A higher credit limit can help you reduce your utilization ratio. If you pay your credit card bills on time or inform the credit card issuing bank or finance company about the increase in your income, then your credit limit can increase. At the same time, having more than one credit card will also increase your limit and your CUR will remain low. For this, you can keep a credit card without annual fee.
Do this to recover credit score
Let us tell you that your credit utilization ratio has a direct impact on your credit score. A CUR of 30 percent is considered ideal. This shows your better credit management. At the same time, more than 30 percent CUR for a long time acts like a warning for your credit card issuing bank or finance company. But if you pay the credit card bill on time even after using most of your credit limit, then it is likely to have less impact on your credit score.
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Tags: credit card, Credit card limit
FIRST PUBLISHED : March 25, 2023, 15:10 IST