What is Credit Utilization Ratio, How it Affects Your Credit Score

Credit Score: It is well known that credit score plays the most important role in getting a loan. Those who have a bad credit score find it difficult to get a loan. But still there are some things related to credit score which few people know. For example, on what basis the credit score is calculated or what is the credit utilization ratio. Today we will tell you about some similar things related to credit score.

Your credit score should be

  • First of all, know that the credit score ranges from 300 to 900.
  • Generally a credit score above 750 is considered good.
  • Those who have a higher credit score are also more likely to get a loan.

Credit bureaus keep every record of you

  • Many credit bureaus decide the credit score of the customers.
  • Major credit bureaus include Trans Union CIBIL Experian, CRIF High Mark and Equifax.
  • These credit bureaus keep a record of your monthly bills and loan installments.
  • They calculate your credit score on the basis of some years of records.

credit utilization ratio

  • Credit Utilization Ratio (CUR) means how much you use in a month of the credit limit of your credit card.
  • The CUR has a great impact on the credit score. Your CUR depends on how much you use your credit card.
  • The more you use the credit card, the higher will be your CUR.
  • It is always advisable to keep the credit utilization ratio below 30% for a good credit score. This indicates that you are not too dependent on credit cards. On the other hand, if your credit utilization ratio is more than 50%, then the lending company will see you as a risky customer.

Advantages of having an old credit card

  • Your loan being very old or using a credit card for many years is considered good in terms of credit score.
  • In fact, it shows that you use the loan properly. You pay his installments on time.

Do not apply again and again

  • Do not apply repeatedly for loans or credit cards.
  • This is not considered good in terms of credit score. This brings down the credit score.

Pay the loan on time

  • Pay your loan EMI regularly and don’t miss it.
  • If you make one late payment or default, it can reduce your credit score by up to 100 points.

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