ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If you have a maxed-out credit card, you’re using 100% of your available credit for that account. Depending on the rest of your credit report, this can be devastating. It’s not uncommon for a maxed-out credit card to drop a credit score by up to 45 points.

Detailed explanation-2: -Credit cards can be a useful tool for financing major purchases and earning lucrative rewards like airline miles. But carrying a balance on those cards can lead to troublesome high-interest debt and lower your credit score if it brings your credit utilization ratio too high.

Detailed explanation-3: -You max out a card if you reach the credit limit, and this means additional transactions will be declined. A maxed-out credit card can cause your credit score to drop, possibly by as many as 50 points. This will also put you in credit card debt if you can’t pay back your full balance by the due date.

Detailed explanation-4: -At the opposite end of the spectrum, a credit utilization ratio of 80 or 90 percent or more will have a highly negative impact on your credit score. This is because ratios that high indicate that you are approaching maxed-out status, and this correlates with a high likelihood of default.