Can We Pay Before Credit Card Statement Date to Maintain Good Utilization Ratio?

Using a personal credit card for official tours can pose challenges in maintaining a good credit utilization ratio, which is crucial for a healthy CIBIL score. However, paying your credit card dues before the statement date can help in managing this effectively. Here's how it works.

Benefits of Early Payment

Early payment of your credit card dues, before the statement is generated, can help you restore the credit limits you have already utilized. This approach ensures that you can use a higher credit limit on a monthly basis than the current limit.

By making a payment before the statement date, you reduce the outstanding balance reported to the credit information bureau like CIBIL. This will consequently show a lower amount outstanding, which can be beneficial for your credit score.

Understanding Credit Utilization Ratio

As conveyed by CIBIL representatives, a credit utilization ratio of up to 30% is considered fine for a good credit score and credit history. The credit utilization ratio is the percentage of your total credit limit that is currently being used. Keeping this ratio low can improve your overall credit score.

It's essential to understand that paying your outstanding balance in full by the due date is more important than paying early.

Strategies for Optimal Utilization

While early payment can be beneficial, it should not affect your credit score negatively as long as you are paying the outstanding balance in full. In fact, using higher credit limits and paying the outstanding on time can reflect positively on your ability to manage your finances responsibly.

However, it's crucial to avoid auto-debit settings, as they can lead to paying extra unnecessarily. Auto-debit is not a way to be rewarded for paying early, as the credit bureaus only consider the outstanding balance from the previous statement date.

Optimal Utilization Ratio for Good CIBIL Score

The ideal credit utilization ratio for a good CIBIL score is generally below 30% or 30% of the credit limit. This means that if your credit limit is, for example, Rs. 1,00,000, you should aim to use Rs. 30,000 or less at any given time. Keeping your utilization ratio below this threshold can significantly improve your credit score.

Additionally, it's wise to pay your entire outstanding balance by the due date to avoid any potential negative impact on your credit score, regardless of your utilization ratio.

Conclusion

Making payments before the statement date can be a strategic move to maintain a good credit utilization ratio, especially when using a personal card for official tours. However, the most crucial factor is ensuring that you pay your outstanding balance in full by the due date. Maintaining a low credit utilization ratio, ideally below 30% of your credit limit, can greatly contribute to a good CIBIL score and overall financial health.