How does a credit card billing cycle impact my credit utilization ratio?

Your credit utilization ratio is the percentage of your available credit that you are currently using. It is an important factor in determining your credit score. The credit card billing cycle can impact your credit utilization ratio in the following ways:

1. Statement Balance: The statement balance is the amount you owe on your credit card at the end of each billing cycle. If your statement balance is reported to the credit bureaus, it will be used to calculate your credit utilization ratio. For example, if you have a credit limit of ₹50,000 and your statement balance is ₹10,000, your credit utilization ratio would be 20% (10,000 / 50,000).

2. Timing of Payments: Your credit utilization ratio can vary depending on when you make payments. If you pay off your balance in full before the statement closing date, your statement balance will be reported as zero, resulting in a low credit utilization ratio. However, if you carry a balance into the next billing cycle, it will contribute to your credit utilization ratio.

3. Credit Limit Increases: If your credit card issuer increases your credit limit, it can positively impact your credit utilization ratio. A higher credit limit means you have more available credit, which can lower your overall utilization ratio if your spending remains the same.

Maintaining a low credit utilization ratio is generally favorable for your credit score. It is recommended to keep your utilization ratio below 30% to demonstrate responsible credit usage. By paying attention to your billing cycle and managing your credit card balances effectively, you can help keep your credit utilization ratio in a healthy range.