Simple Definition
Credit utilisation is commonly calculated on credit cards and revolving credit lines. It compares outstanding balance with total available credit limit.
Why It Matters
High credit utilisation may negatively affect credit profile because it can indicate dependence on borrowed funds.
Example
If your credit card limit is ₹1 lakh and outstanding amount is ₹40,000, credit utilisation is 40%.
FAQs on Credit Utilisation
Does credit utilisation affect CIBIL?
Yes, high utilisation can affect credit score depending on bureau scoring models.
How can utilisation be reduced?
Paying down outstanding balances or increasing available limit can reduce utilisation.