How Much Credit Utilisation is Good? A Simple Guide

When it comes to maintaining a good credit score, one key number often overlooked is the credit card utilisation ratio. This ratio tells you how much of your available credit you’re actually using. Get it right, and your credit score can shine. Get it wrong, and it might drop, even if you’re paying your bills on time.

In this blog, we’ll explain what credit utilisation means, how to calculate it, the ideal range to aim for, and tips to keep it healthy.

What Factors Go into Your Credit Utilisation Ratio?

Your credit card utilisation ratio is basically a percentage that shows how much of your available credit limit you are using at a given time.

It is calculated based on:

Your Credit Limit: The maximum amount you can spend using your credit card(s).
Your Outstanding Balance: How much you currently owe on your credit card(s).
Total Credit Across All Cards: If you have multiple cards, the utilisation is calculated across all of them.

Example:

If your credit limit is ₹1,00,000 and you’ve spent ₹40,000, your credit card utilisation ratio is 40%.

Why does this matter? Because your utilisation is one of the important factors affecting your credit score. High utilisation signals to lenders that you may be relying too much on borrowed money, which can lower your score.

How to Calculate Your Credit Utilisation

Calculating your utilisation is simple:

Credit Utilisation Ratio (%) = (Total Outstanding Balance ÷ Total Credit Limit) × 100

Here’s a step-by-step:

Check your credit score and note your total credit limit from your credit card statement.
Add up your outstanding balances from all your credit cards.
Divide the total outstanding balance by the total credit limit.
Multiply the result by 100 to get the percentage.

Example with multiple cards:

Card A limit: ₹50,000 | Balance: ₹10,000
Card B limit: ₹70,000 | Balance: ₹21,000

Total limit = ₹1,20,000

Total balance = ₹31,000

Credit Utilisation = (31,000 ÷ 1,20,000) × 100 = 25.8%

That 25.8% is your overall good credit utilisation ratio. If you keep it within a healthy range, it’s good news for your score.

What Is a Good Credit Utilisation Rate?

While there’s no magic number that applies to everyone, financial experts generally agree on a range for credit utilisation for the best credit score.

Ideal range: Below 30% of your total credit limit.
Excellent range: Around 10–20% shows you’re using credit but not over-relying on it.

If you regularly cross 50% or more, it might send a signal that you’re financially stretched, which could hurt your existing good credit score over time.

Even if you pay your bills in full each month, your utilisation ratio is often calculated based on your statement balance, so aim to keep your spending below the limit well before the bill is generated.

How Does Credit Utilisation Affect Your Credit Scores?

Your utilisation ratio is one of the biggest factors affecting your credit score. Here’s how it works:

1. Low Utilisation = Positive Impact

Shows you’re using credit responsibly.
Builds trust with lenders.
Helps you maintain a good credit score.

2. High Utilisation = Negative Impact

Suggests you may be dependent on borrowed funds.
Increases the risk perception for lenders.
Can lower your credit score even if you’ve never missed a payment.

So yes, your credit card utilisation directly affects your score. Maintaining a good credit utilisation ratio is key to improving and keeping a strong credit profile.

How to Lower Your Credit Utilisation Rates

If your utilisation is higher than the recommended range, here’s how you can bring it down:

1. Pay Off Balances Early

Don’t wait until the due date; make mid-cycle payments to lower the reported balance.

2. Spread Purchases Across Multiple Cards

If you have more than one card, divide your expenses to keep each card’s utilisation low.

3. Increase Your Credit Limit

If your income has increased or you’ve been a responsible borrower, request a higher credit limit. This instantly lowers your utilisation; just don’t use it as an excuse to spend more.

4. Track Spending Closely

Set alerts when you’re approaching 30% of your limit so you can slow down spending.

5. Check Credit Score Regularly

Monitoring your score helps you see how your credit card utilisation ratio changes over time and lets you catch any unusual activity quickly.

Final Word

A good credit utilisation ratio is one of the easiest ways to protect and grow your credit score. Aim for under 30%, and if you want to reach the credit utilisation for the best credit score, stay in the 10–20% range.

Remember, even if you pay on time, high utilisation can still hurt your score, so it’s worth keeping an eye on it. By managing your spending, paying balances early, and regularly checking your credit score, you can maintain a healthy utilisation rate and enjoy the benefits of a good credit score in the long run.