CIBIL Score Tips: Those who use credit cards blindly during the sale must read this..
In today's time, the use of credit cards has increased a lot. Earlier people used to use credit cards for big transactions or any deal, but in today's time, people have started doing every small and big transaction with credit cards. A big reason for this is that by doing transactions with a credit card, you get some reward points, and by redeeming them you can get some cashback or shopping voucher. Because of this, people use credit cards more and more. Some people even finish the entire limit of their credit card. Let us tell you that this has a bad effect on your CIBIL. Let us know whether it is beneficial or harmful.
First, understand what is credit limit
A credit card is a kind of loan. That is, in a way you take a loan from the bank and spend it and then repay it later. Banks set a limit on every credit card according to your credit score. You cannot use that card to shop beyond that limit.
Should you use the entire credit limit or not?
Even though you have been given a limit to spend up to a fixed limit on the credit card, which you can use completely, you should not do this. The bank considers customers who do this as risky customers. The bank feels that this customer is too much dependent on loans. If you use your credit limit too much every month, then in such a situation the bank can increase your credit limit. But until the limit is not increased, your credit score i.e. CIBIL score will be adversely affected.
Take care of the credit utilization ratio
For a good credit score, you should keep your credit utilization ratio i.e. CUR around 30-40 percent. If it exceeds 50 percent, then it is seen negatively. In such a situation, you may have trouble getting a loan or may have to pay more interest on the loan. Whenever you apply for a loan, your credit utilization ratio is also looked at.
How to calculate CUR?
To calculate the credit utilization ratio i.e. CUR, divide the total due amount of the credit card by the total card limit. After that, multiply the figure obtained by 100. With this formula, you can calculate the credit utilization ratio of your credit card.
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