What is the high proportion of balances against the credit line?
June 4, 2019
This is a very common term among financial institutions and means that a user has used an important part of their credit line.
For example: imagine that you have a credit card with a line of 15 thousand pesos. And in a month you make purchases for 11 thousand. At this point your credit status has a high proportion, since you have used a large part of your line of credit.
Also considered a high proportion when you have overdrawn your card
It is also considered a high proportion when you have overdrawn your card. As in the previous example: you used your total credit line and how you did not pay on time the accrued interest, so now you owe more than 15 thousand pesos.
How does it affect you
There is nothing wrong, in fact it is normal. Imagine you buy a refrigerator for 12 months and it cost you 15 thousand pesos. There you have used your entire line of credit.
However, if you have a bad handling of your cards and your proportion does not decrease, on the contrary it is maintained or increased then this will be seen in your history and even if you pay on time, if your proportion is high every month, your credit bureau score can decrease.
The proportion of balances is a sign of risk used by financial companies to assess how likely it is that a person can stop paying. They generally deny credits when the person has a high proportion, or they grant the loan but with a very high rate.
What can you do?
The best advice is to decrease the use of your credits. Pay more than the minimum on your cards and not request more credits than you can pay. If your debts consume more than 30% of your income you may be in serious financial trouble.