Credit utilisation rate is the sum of the outstanding balances on your credit card as a percentage of the total limits on all your credit cards. Credit utilisation rate is one of the factors affecting your credit score.

1. CREDIT SCORE INFO SERIES-5

2. REAL POWER OF UTILIZATION RATE
RESTORE,ENHANCE & PROTECT
YOUR CREDIT HEALTH

3. CARDINAL RULE
• Your credit card balance should never be more than 30% of
your credit limit
• Never...
Not on Day 1, Nor on day 15

4. What is Utilization Rate?
• Utilization rate is the debt you carry on your credit card in
proportion to your balance simply stated.
• Utilization rate= outstanding balance/credit limit

5. CREDIT SCORE INFO SERIES-3

6. For eg
• For a simple example, let's say you have one credit card, and
it has a Rs.40000 limit. If you owe Rs.12000 on that account,
your utilization rate is 30%.

7. Why 30% rule??
• By showing responsible use of your credit card, you fit the
profile of someone more likely to repay debt.
• The higher your utilization rate, the more financially strained
you appear to the credit bureaus.

8. Credit reports change daily
• If you pay off your balance each month, you might assume it
does not matter whether 30% threshold...
BEWARE OF ASSUMPTION
• Your credit report will show the balance on the day it pulled.

9. What if you have a utilization rate above 30%?
• Option A-Transfer funds so that each card has a 30% balance
or less.
• Option B- Pay off any debts that put your balance about 30%
limit.
• Option C-Ask your credit card company to increase your limit
so that the balance is less than 30%
• Open another credit card account and transfer balance
accordingly.

10. Option A- Transfer Debts
• Let's say you have 5 credit cards,2 with no balance and 3
with 50% balance...
• Try spreading all the 5 cards so that it becomes 30% on each.

11. Option B- Pay your Balances down
• Easier said than done, consider this option only if you are
able to.
• Cut costs if you are spending heavily on unrequired
shopping, eating out etc.
• Start budgeting
• Pay the card with highest rate of interest on priority.

12. Option C- Increase your credit limit
• Try asking your company to enhance your credit limit.
• If you are already on a higher side company might be
hesitant to do that, bargain as much as you can is the
mantra.

13. Increase your credit limit
Ask your credit following questions before making the request:
• Do I qualify for a limit increase without having you run my
credit report?
• Can I request the maximum increase or must I provide you
with specific limit request?
• If I request way too much, will you deny the request
completely or will you make a counter offer?

14. Points to remember if your limit is increased
• Remember to keep your balance the same
• Control your spending
• Start paying down your credit balance as much as possible.
• Create a budget

15. Remember
• Credit bureaus don't care how high you limit is
• BUT they do care how high your utilization rate is.

16. Option D- Open another credit card
• This is a good choice only if you have less than 3 credit cards.
OR
• else if you have more than 3 cards and your utilization rate
exceeds 30%

17. Cards with no present spending limit
• If you have a credit card with no preset spending limit, credit
bureaus report your credit limit using the highest balance
you ever had on your credit card.
• If you spend the same amount on month, it can throw your
utilization rate out of whack, to avoid this spend one month
"hiking up" your balance as high as possible to reach 30%
utilization rate.