How To Keep Credit Utilisation Low? Expert Guide
When it comes to managing your credit health, one of the most important yet often overlooked factors is credit utilisation. Lenders and insurers look at how much of your available credit you actually use to understand your spending behaviour. Keeping this ratio under control can make a big difference in your overall credit profile.
If you’ve been wondering how to keep credit utilisation low and why it matters, this guide will walk you through everything in simple terms.
What Is a Credit Utilisation Ratio?
The credit utilisation ratio is the percentage of credit you use compared to the total credit available to you. For example, if your total credit limit is ₹1,00,000 and you’ve used ₹30,000, then your utilisation ratio is 30%.
Experts often recommend aiming for the best credit utilisation ratio, which is usually below 30%. A good credit utilisation level shows you are responsible with your spending and not over-reliant on credit. On the other hand, high utilisation signals financial stress, which can affect how lenders and insurers view you.
To stay on top of things, it’s a good habit to check your credit score regularly, since utilisation is one of the key factors influencing your overall score.
Pay Off the Same Day
The best answer to ‘how to keep credit card utilisation low’ is to pay off your purchases the same day you make them. Instead of waiting until the billing cycle ends, clear your balance quickly.
This keeps your utilisation ratio lower because less outstanding debt is reported. It also reduces the temptation of carrying forward balances, helping you maintain financial discipline.
Make Multiple Payment
If you frequently use your credit card for various expenses, a single monthly payment may not be sufficient to keep your utilisation low. A smart strategy is to make multiple payments in the same month.
By paying off smaller amounts more frequently, your outstanding balance stays low throughout the month. This approach helps keep your reported utilisation ratio well within the good credit utilisation range.
Decrease Your Spending
One of the most effective ways to maintain a good credit utilisation ratio is to simply cut down on how much you spend using your credit card. The less you charge to your card, the lower your utilisation will be.
For example, if your limit is ₹1,00,000 and you usually spend ₹70,000, your utilisation shoots up to 70%, which is very high. But if you bring your spending down to ₹25,000, your utilisation drops to 25%, keeping you within the best credit utilisation ratio range.
This doesn’t mean you should avoid using your credit card altogether. It just means being mindful of your expenses. Using your card for essential purchases and avoiding unnecessary swipes is a simple but powerful step in learning how to keep credit utilisation low.
Ask for a Credit Limit Increase
Sometimes, the easiest way to reduce utilisation is to increase your available credit. If you have a stable income and a decent repayment history, you can request a credit limit increase.
For example, if your limit doubles from ₹50,000 to ₹1,00,000 while your spending remains ₹20,000, your utilisation ratio instantly drops from 40% to 20%. This small step can improve your profile and bring you closer to the best credit utilisation ratio.
Use More Than One Card
Relying on a single card often leads to higher utilisation. A practical tip is to use more than one credit card and distribute your expenses across them.
For instance, instead of charging ₹40,000 on one card with a ₹50,000 limit (80% utilisation), you could split it between two cards, reducing utilisation on each. This balances your spending and shows that you are not maxing out a single account.
Keep Accounts Open
Another mistake people make is closing old or unused credit accounts. Doing so lowers your total available limit, which can make your utilisation ratio spike.
For example, if you have two cards with a combined limit of ₹1,00,000 and you close one with a ₹40,000 limit, your total available credit drops. Even if your spending doesn’t change, your utilisation ratio will automatically rise.
That’s why one of the easiest tips to keep credit utilisation low is simply to keep your credit accounts open, even if you rarely use them.
Why Low Credit Utilisation Matters
Maintaining a good credit utilisation ratio has direct benefits. It helps build a stronger credit profile, improves your score, and makes you appear financially disciplined to lenders and insurers. It also ensures that you always have enough available credit for emergencies.
In fact, among the factors that affect your credit score, utilisation is one of the most influential. By keeping it low, you not only protect your financial health today but also set yourself up for easier approvals and better interest rates in the future.
Final Thoughts
Learning how to keep credit card utilisation low is a small but powerful step towards maintaining strong financial health. Whether it’s making payments early, splitting expenses across cards, or keeping accounts open, every effort contributes to staying in the best credit utilisation ratio range.
Remember, your utilisation is something you can control with simple habits. Stay disciplined, check your credit score regularly, and make smart spending choices. With consistent effort, you’ll enjoy all the long-term benefits of a healthier credit profile.
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