Neutral impactEconomy
Two people spend ₹30,000 on credit cards, but one may have a lower credit score. Here's why it happens
Mint 57 min ago·9 Oct 2026, 6:02 am
Credit utilisation is the percentage of your total credit limit that you are currently using. For example, if you have a credit card with a limit of ₹1 lakh and you have spent ₹30,000, your utilisation is 30%. A high utilisation rate, such as using more than 30% of your limit, can negatively impact your credit score. This is because it signals to lenders that you may be over-reliant on credit, which increases your perceived risk as a borrower.
This metric is a key part of your credit health and is tracked by credit bureaus. A lower utilisation rate generally indicates responsible credit management. For investors, this is important because a healthy credit score can make it easier to get loans or credit cards at better interest rates. This financial stability can be a positive indicator for a company's management and long-term financial health.
To maintain a good score, it is advisable to keep your credit utilisation low. You can do this by paying off your credit card balance in full each month or by requesting a limit increase from your bank. Investors should monitor the credit health of companies they invest in, as a company with strong financial discipline and access to capital is often a more stable investment.
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- Category: Economy.
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