How Credit Card Can Impact Your Credit Score | Credit Help India


How you use your credit card affects your CIBIL score. This three-digit number establishes your creditworthiness and is used by other lenders to decide whether or not to lend to you. Your CIbil score is critical when it comes to credit product approval.

The following are some of the ways your credit card affects your credit score:

  • Your Credit Card Repayment History

Your card repayment history is the single most important factor that affects your credit score. This is responsible for about 35% of your credit score. Paying your credit card bill on time is important for maintaining a good credit score. Late payments or just paying the minimum sum due on your card can have a negative impact on your credit score.

  • Your Credit Utilization Ratio

Consider the case where you have two credit cards. Each credit card has a Rs.20,000 credit cap. You have a limit of Rs.40,000 in credit available to you. So, if you spend Rs.30,000 in a single month, that's good, right? After all, you'll be paying back the whole balance the next month.

It doesn't matter if you pay off the balance in full the next month because your credit score has already suffered because your credit utilisation ratio is higher than recommended.

  • How Long You Have Held a Credit Card

If you've had a credit card for the last 5 years or so and haven't used it much, you've probably considered closing the account. That may not be the best course of action, since your credit score is heavily influenced by the duration of your credit history.

A credit card with a long history gives you more information about your credit history than one that has only been used for a few months. Let's say you didn't know how to use your credit card when you first received it and fell behind on your payments for the first two months. However, you quickly realised your error, and your payment history in the years since has been spotless.

The Number of Credit Cards in Your Name

Although having two credit cards will help you maximise the amount of credit you have available and lower your credit utilisation ratio, having too many credit cards can backfire.

For two reasons, you shouldn't have more than three active credit cards.

  • It's possible that you won't be able to keep track of payments on all of your cards. This could result in a payment default.
  • To a lender, having so many credit cards indicates that you are overly reliant on credit.


Many credit card issuers have reduced the credit card limits on their customers' credit cards as a result of the recent outbreak of the COVID-19 virus pandemic. This has been implemented in anticipation of an increase in the default ratio. This precautionary measure may benefit card issuers, but it may be harmful to cardholders.

It's worth noting that the credit card utilisation ratio is one of the most significant variables considered by credit bureaus when determining credit scores. In fact, the weight age of this factor is estimated to be between 20% and 30%. As a result, if your credit card's credit cap is reduced but your expenses remain the same, your credit usage would be higher. If your credit card's credit limit has been reduced significantly, make sure your expenses on that card have been reduced as well. If this is not addressed, the cardholder's credit score will suffer as a result.

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