Credit card usage is convenient, but using 90% of your limit can hurt your credit score even if you pay the full bill. The reason lies in the credit utilisation ratio (CUR), which measures how much of your available credit you are using. Lenders report this snapshot to credit bureaus, and high utilisation signals risk. For example, if your limit is ₹1 lakh and you spend ₹90,000, your utilisation is 90%. Even if you clear the bill on time, the reported utilisation remains high, affecting your score. Experts suggest keeping CUR below 30%, ideally under 10%, to maintain a healthy profile.
Payment timing plays a crucial role. Paying down balances before the statement date can reduce reported utilisation. With multiple cards, lenders assess both overall utilisation and per-card usage. So, even if your combined utilisation is moderate, one card maxed out at 90% can still hurt your score. Increasing your credit limit can lower utilisation if spending stays constant, though it may involve a hard enquiry that slightly impacts your score.
Persistent high usage is more damaging than occasional spikes. To protect your credit profile, spread expenses across cards, pay early, and monitor utilisation closely. Managing CUR effectively ensures your repayment discipline translates into a strong credit score.
