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If you are someone who relies on credit cards for day-to-day expenses, managing your credit utilisation ratio (CUR) is vital to maintaining a healthy financial profile. But what is the credit utilisation ratio? Let’s figure it out!

Highlights -

• Keep your credit utilisation ratio under 30% of your credit limit for strong financial standing.

• Low CUR signals responsible credit use, boosting creditworthiness with lenders.

• Benefits of lower CUR include increased credit limit, lower interest charges, and better loan terms

• Pay early, reduce spending, request a limit increase, and manage multiple cards wisely.

What is the credit utilisation ratio?

CUR is the proportion of your credit card balance to your total credit limit, expressed as a percentage. To put it simply, it reflects how much of your available credit you are using. Financial experts suggest that maintaining a CUR below 30% is optimal for a healthy credit score.

What is CUR's impact on credit scores?

Your credit score is influenced by various factors, and your CUR is one of the critical ones. Lenders and credit bureaus like CIBIL, Experian, Equifax, and CRIF consider your CUR when assessing your creditworthiness. Maintaining a CUR below 30% is recommended, as it reflects responsible credit management and reduces the risk for lenders. Hence, a lower CUR can positively impact your credit score.

Also Read - Building A Credit History: Why Does a good credit score matter & How To Do It?

Can my credit limit increase?

A low credit utilisation ratio not only promotes your credit score but also helps boost the credit limit on your existing credit cards. An increased credit limit means more available credit, thus reducing your CUR further. This cycle of responsible credit usage can enhance your creditworthiness and open doors to better financial opportunities.

The takeaway - smart strategies for credit utilisation ratio management

• Early balance repayment: Clearing your credit card balance ahead of schedule can substantially impact your CUR and your personal finances. Make it a habit to pay off your credit card payments before the billing cycle ends.

• Controlled spending: Practice prudence in your spending habits. Decreasing your expenses can help you maintain a low CUR effortlessly.

• Loan-powered balance settlement: Consider making credit card payments using a personal loan. This approach not only lowers your CUR, but might also offer a lower interest rate.

• Credit limit increase: Reach out to your card issuer and inquire about a credit limit increase. A higher credit limit automatically reduces your CUR.

• Strategic card opening: Intelligently opening a new credit card can distribute your expenses and prevent a high CUR.

• Mindful card retention: Even if you're not using certain cards, refrain from closing them. Their available credit contributes to your CUR, helping to keep it within the recommended range.

Find the latest articles on Spending here.

Also Read - Make the most of your credit card: 6 Tips to be a successful cardholder.

Disclaimer: This article is intended for general information purposes only and should not be construed as insurance or investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.