Credit card utilisation

[zaidmalik94772]

If I use 80% of credit card limit and convert it to EMI will it affect my credit score?

 

[GURUWALKE]

Yes

 

[RitamModak]

Yes, using 80% of your credit card limit and converting it to EMI can negatively impact your credit score.

Here's why:

• High Credit Utilization Ratio: A high credit utilization ratio, which is the amount of credit you're using compared to your total credit limit, can be seen as a risk by lenders. A ratio of 80% is considered high and could lower your credit score.
  
  
• Reduced Available Credit: Converting a large portion of your credit limit to EMI can significantly reduce your available credit. This can make it difficult to obtain new credit or increase your existing credit limits in the future.

To maintain a good credit score:

• Keep your credit utilization ratio below 30%: This is generally considered a healthy range.
• Make timely payments: Ensure you pay your credit card bills on time, including any EMI payments.
  
  
• Limit new credit applications: Applying for new credit too frequently can lower your credit score.
  
  
• Monitor your credit report: Regularly check your credit report for errors and to ensure your information is accurate.

While using credit cards can be beneficial, it's important to use them responsibly to avoid negatively impacting your credit score.

 

[TaxWiser]

If I use 80% of credit card limit and convert it to EMI will it affect my credit score?

Using 80% of your credit card limit and converting it to EMI can have an impact on your credit score. Here’s how it works:

■ Credit Utilization

○ High Utilization: Using 80% of your credit limit means your credit utilization ratio is quite high. Credit utilization is the percentage of your credit limit that you’re using, and it’s a significant factor in your credit score. Ideally, you should keep this ratio below 30%.​

○ Impact on Score: A high utilization ratio can lower your credit score because it indicates that you might be over-relying on credit.​

■ Converting to EMI

○ Temporary Relief: Converting your outstanding balance to EMI can provide temporary relief by breaking down the repayment into manageable monthly installments.​

○ Credit Report: The outstanding amount will still be reflected on your credit report, but as an EMI loan rather than a revolving credit balance. This can be seen positively as it shows you’re taking steps to manage your debt responsibly.​

■ Long-Term Effects

○ Consistent Payments: If you make your EMI payments on time, it can help improve your credit score over time. Timely payments are a crucial factor in maintaining a good credit score.​

○ Reduced Utilization: As you pay down the EMI, your credit utilization ratio will decrease, which can positively impact your credit score.​

Example
Let’s say your credit card limit is ₹50,000, and you use ₹40,000 (80% of your limit). Converting this ₹40,000 to EMI means you’ll pay it off in installments. While your credit utilization is initially high, making regular EMI payments will gradually reduce your outstanding balance and improve your credit utilization ratio.

Key Takeaways

• Short-Term Impact: High utilization can temporarily lower your credit score.
• Long-Term Benefit: Regular EMI payments can improve your credit score over time.

So, while there might be a short-term dip in your credit score due to high utilization, converting to EMI and making consistent payments can help improve your score in the long run.

To cut the Long story short, if this purchase of your is a necessity or once in a while type purchase then go with it and if it's for some kind of Want/FOMO type purchase then try to avoid/postpone it.

(Source: Conversation with Gemini AI)

 

[Bhuvanchandra M]

If I use 80% of credit card limit and convert it to EMI will it affect my credit score?

Yes it does affect your credit score since high credit utilization ratio may go for a good toss

 

[jacker]

If I use 80% of credit card limit and convert it to EMI will it affect my credit score?

yes it definitely does, advising you to keep the utilization below 30% of the total available limit across all cards

 

[deveshnimwal]

Utilizing 80% of credit card limit on regular basis definately decrease your credit score whether you convert it to emi or not.
Reason for the same is increase in High unsecured trades.
To increase the credit score you Must use multiple credit cards and utilize each of them by 20-30 percent only.
And yes if you convert any utilization to EMI it will decrease your credit score.

Thanks and regards