Credit cards are used enormously and are sometimes overused.  Using your credit card means credit utilization which affects your credit score mostly. Credit utilization is an important factor that credit card issuers check while looking at your application. Your credit utilization tells you the behavior of purchase and credit card usage. The more you use your credit card, the higher your utilization rate will be.

It is important to understand what and how much should be your credit utilization ratio, how it works, and how you can manage it.

Credit Utilization in Credit Card Application Post

Credit Utilization Ratio – In simple statements, credit utilization is all about how you are using your cred limit given. Utilization rate is the utilization of the credit limit provided to you on a credit card. The credit limit is determined by the bank. The usage of the credit limit is in your hands and the more you make purchases through your credit card, the more utilized the limit will be.

Sometimes, people use the credit card over the given limit of the bank, this is harmful to your credit score. Although your credit score is not specifically determined by the bank itself it is however important to keep your credit under optimal utilization. You will have to utilize the credit card limit carefully because it is a crucial factor for the same.

Credit Utilization Role in Credit Application

The credit utilization report plays a very important role in making your profile look eligible and trustworthy. The standard credit utilization rate is 30% of the credit limit but 50% is also fine. However, when you go beyond that, your profile might not make the lender much interested in you but it is still better than overutilizing the limit.

Overutilization or overusing the limit means that you not only used the credit limit given to you but you are trying to go over the limit and make the payments from the card. This will increase your risk of not being able to make it to the list and then you will not be provided any financial aid.

Therefore, it is important to use your given credit limit in the right way and keep your expenses under control and also keep your credit utilization under control. Not only this but there are other benefits of optimal credit card utilization ratio.

Benefits of Optimal Credit Utilization Ratio

The credit utilization ratio is something which if used carefully and the ratio is optimal, can make you eligible for the following benefits –

Boost in Credit Record

Optimal utilization of your credit limit will help you maintain a good credit score and make your credit history great. A good credit score is somewhere more than 700 and if we go over 750 it is considered as an excellent score. Your credit history is your profile which builds trust in front of the lender in your place. Your credit history or credit report shows the outstanding amount left, the payment made, payment dates, inquiries by the borrower to the lender for the credit application, etc.

The optimal your credit utilization will be, the more beneficial it will become for you and your credit scores.

Seamless approval to Credit Applications

The better or the lower your credit utilization ratio is, the easier it will be for you to qualify for new loans. A good credit record and credit score can get you the best deals as well. Such as getting loans at a lower interest rate.

Credit Card upgrade

Good credit utilization can also help you get an upgrade on your credit card. This means you can get a hike on your credit limit if your optimization ratio is standard. This can also get you good offers from other credit cards with great features which you might not be present in your existing credit card.

Make Bill Payments Easy

If you have so far used or optimized the credit limit carefully by spending the amount on your needs, the bills will be easy to be paid in full. Paying in full will eliminate any interest rate and taxes which you could have ended up paying if you pay your bill in the long run.

If you pay your minimum due which is below the total due, then the standing amount will incur the interest rates. If you keep on paying like that, the interest can mount to 30% to 45% annually from 2.50% to 3.50% per month.


Credit utilization is very important in case you wish to get financial aid in the future. If your utilization rate is not optimal, you might be disqualified for any type of loan from the lender. An optimal credit utilization ratio ensures your safe and secure credit report. Your credit report has all the details related to your credit history, so they can determine whether or not they wish to put their money on the table for the borrower.

Credit utilization is a big part of your credit report and having a good ratio will help you get the best deals in the market, better opportunities to qualify for the loan in the future, and much more. Hence, the role of credit utilization is very important and you need to be very careful about it.

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