How to use credit cards without affecting CIBIL score, know here!


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Nowadays many people have credit cards. The use of credit cards has increased. Now big transactions have started happening through credit cards. Using credit cards also gives some reward points. After this, you can get cashback on it. Many people use credit cards for shopping. The credit card is used till the entire limit is exhausted. But we are going to tell you how much credit card should be used despite the limit.

How is the credit card limit determined?

A credit card is a type of loan. Which you borrow from the bank, spend and then repay. The bank decides its limit according to your credit score. But if you use the credit card till the limit is exhausted then it is wrong. Because banks consider you a risky customer.

If you are using the entire limit, the bank thinks that you are dependent on the loan. If you use a credit card every month then the bank can increase your credit limit. But this has a bad effect on your CIBIL score.


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What should be the credit utilization ratio?

If you want to maintain a good CIBIL score then you should maintain a credit utilization ratio i.e. CUR of 30 to 40 percent. If it is more than 50 percent then it is considered negative. This may make it difficult for you to get a loan in future or you may have to borrow at a higher interest rate. Because the credit utilization ratio is also considered while taking a loan.



How to Determine Credit Utilization Ratio

Divide the total amount owed on a credit card by the total limit on the card. Then multiply by 100. You can calculate the credit utilization ratio of your credit card using this formula.