March 12, 2025 · 14 mins read
Santosh Kumar
Credit Cards have a reputation for degrading your credit score. In reality, the credit score depends on the way an individual uses their Credit Card. If you use your Credit Card efficiently, you can enjoy a host of benefits and improve your credit score, too. But you need to be strategic with your expenses and repayments to do so. This article lists some proven ways to improve your credit score with a Credit Card.
Banks and financial institutions in India assess your creditworthiness with your credit score. Hence, a good Credit score becomes a fundamental criterion for loan approvals. An individual with a low score becomes a higher risk to the lender, and they may reject loan applications. However, with a decent Credit score, you can ensure loan approvals at affordable interest rates.
Some of the benefits of a good credit score include the following.
A good credit score of 750 and above can help you get loan approvals. The higher the credit score, the faster the chances of getting a loan approval. Some banks may send you pre-approved loan offers based on your good credit score.
Some banks offer lower interest rates on loans to individuals with a higher credit score than others. Even a 0.25% lower interest rate on a big home loan will make a big difference over the 20-year life of the loan.
Having a good credit score makes you eligible to apply for credit cards, subject to fulfilling other criteria. Banks too would prefer to have customers with good credit scores as their credit card customers.
Since they offer quick and short-term loans, it is not surprising to know that Credit Cards can impact your credit score. By planning your expenses and finances well, you can improve your CIBIL score using a Credit Card. Here are the ways Credit Card holders can improve their credit score.
Payment history is one of the most important factors in your credit score. Therefore, clearing the dues before the due date is essential to build a good credit score.
In addition, remember to make payments on time and ensure that there are no arrears or late payments, which can hurt your credit score. Paying debts on time will also help you avoid penalties for late or non-payment of Credit Card dues.
Read More:: Difference Between RuPay Credit Card and Visa Credit Card
The maximum credit limit is the maximum amount that you can borrow from the bank on your Credit Card.
Try not to reach this limit, as it negatively impacts your credit score, leading to financial issues (such as a debt trap). It may also indicate that the borrower has financial problems, which can negatively affect the credit score.
In short, the best Credit Card advice for improving your credit score is to keep your credit utilisation rate low.
However, if you expect to reach your Credit Card limit, ask your bank to increase it before you begin your Credit Card application.
Having the same Credit Card in your wallet for years can help you build a solid credit score. All you need to do is to use it from time to time and pay the bills regularly to keep it active. Besides, it will allow you to show lenders that you are financially stable in the long run.
Read More:: How Much Money Can We Transfer Through PhonePe?
If you do not use your Credit Card, do not close your Credit Card account. This is because doing so can have a negative impact on your credit score.
Credit cards enhance your purchasing power, which may lead to unrestrained spending. If you apply for multiple credit cards, you are indicating to the lender that you are always short on money. As a result, you would have a greater repayment burden, and if you miss paying your EMI on any of your cards, your credit score would be negatively affected.
The maximum amount of credit you can use on every Credit Card is known as the credit limit. Exhausting the credit limit is not a good practice and puts you at risk of credit card debt. As a result, lenders consider such Credit Card holders high-risk. If you max out your Credit Card, you have a higher risk of defaulting on payments, which lowers your credit score. In order to maintain a healthy credit score, you should not use more than 40% of your credit limit.
Periodically checking your credit report and statement is considered a good practice as it lets you keep track of the charges you pay, expense habits, etc. It helps you outline a better plan for your finances. In addition, you can also avoid any unauthorised payments by requesting the bank to correct them based on your assessment.
Read More:: How to add money in Phone Pe wallet?
Improving your credit score can take time and effort, especially if you have made a few missteps or if you have a bad credit history.
To streamline the application process, use the Credit Card apply option available for easy access. However, with good credit habits like using Credit Cards responsibly and paying debts on time, you can get your score back on track.
Some of the factors that affect the credit score adversely include the following.
The factor that affects a credit score the most is payment history. This metric evaluates whether you pay your bills on time. Missed payments tell creditors that you may be unable to afford your expenses. Non-payments can lower your score, but they’ll be removed from your credit report after seven years.
Poor payment history happens if you regularly miss payments, have debts in collections, or file for bankruptcy. If you’re late on a payment, catching up within 30 days is important to avoid a credit score drop. Creditors can report a late payment only after its 30 days overdue.
Read More:: What is YBL in UPI?
Credit utilisation is a ratio or percentage determined by how much credit you have available (your credit limit) and how much you're using (your balance). Try to keep your utilisation rate below 30% to help your score and under 10% if you want the maximum results.
Common mistakes that can hurt your credit utilisation score include making only minimum payments, closing an old account, and maxing out your credit limits. Improve your credit score utilisation rate by paying down debts as quickly as possible, keeping open accounts you don't use, and applying for higher credit limits.
Your Credit report has a detailed record of your current as well as past credit accounts. If there are any errors in your report, it can hamper your score. So, if you have any discrepancies in your report, you must get them rectified immediately.
These errors have to be rectified by your lenders only. Credit does not correct reports without lenders reporting the changes to be made.
Also, checking your credit report can also help you identify if you are a victim of an identity theft.
Read More:: How to Check CIBIL Score on Phone Pe
Accounting for 15% of your credit score, your length of credit history is calculated by looking at the age of your oldest account, the age of your newest account, and the average age of all your accounts. It also considers the age of specific credit accounts and how long it’s been since you’ve used various accounts.
The idea is that the longer you’ve had credit, the more likely you are to maintain good credit, as your credit history allows creditors to see how well you’ve managed your accounts in the past. Avoid closing old accounts - unless there’s an identity theft risk or the fees are unmanageable.
Credit mix measures the different types of credit accounts you have, such as credit cards, retail accounts, and mortgage loans. It’s good to have a variety of revolving and instalment credit accounts.
Revolving credit examples: Credit cards, retail credit cards, gas station cards
Instalment credit examples: Mortgages, auto loans, student loans
Since your credit mix only counts toward 10% of your total score, be careful opening new accounts to boost this factor because opening new lines of credit also impacts your score.
Any time you apply for a new line of credit, whether signing up for a new credit card or financing a car, a hard inquiry is documented on your credit report. Having too many hard inquiries on your report can harm your score. To avoid this, only apply for credit that you really need and qualify for, and space your applications out.
Read More:: How does UPI Mandate Work
You can check your credit report without impacting your credit score. That’s because checking your own report is considered a soft inquiry, not a hard inquiry.
The consequences of not paying your rent will typically include late fees or eviction but won't generally affect your credit score unless your landlord sends the debt to collections.
Your credit score doesn’t reflect how much money you make. You can have a lower income and a max credit score of 850. Alternatively, you can have a high income and bad credit if you don’t make payments on time. Creditors will consider your salary when offering lines of credit and increasing your credit limit, but your salary doesn’t impact your actual credit score.
Your credit score isn't affected by the people around you unless you're financially tied to them (like having a joint bank account or credit card).
Read More:: Rupay Credit Card UPI Charges
As a parent, it is important that you teach your children, especially teens, the importance of having a fair understanding of personal finance. From budgeting their allowances to controlling their spending habits, there is only so much you can guide your kids about. Teaching your teenage kids the importance of having and using a credit card is equally important. It is also important to educate them about the importance of having a high credit score. Therefore, it is your responsibility to teach your children about how to use a credit card responsibly.
Here are some important tips that will help you in educating your children about using credit cards:
Teach them the basics: Start with the basics and educate your children about credit cards, credit limits, interest charges, paying debt and so on. It is important that you explain all these terms to them in detail. Tell them about the importance of a credit score and how their credit card usage will affect it positively as well as negatively. Your children should also be aware of the factors that will bring their credit score down. Make sure to teach them the importance of paying off all the credit card bills on time. Explain to them about various interest, charges and fees related to late payment of bills. All the above basics will give your children a detailed idea about the dos and don'ts of using a credit card.
Lead by example: You should always practice what you preach. Therefore, in order to teach your children the best habits related to credit card usage, it is better that you follow them. After all, kids lead by example. Be a role model for your children by practising the ideal credit behaviour. In addition to teaching your children about good credit card habits, the process will also lead you to a high credit score.
Allow them to use the credit card: After explaining them about the basics of credit card, it is time to actually let them use it. The right time to give credit cards to your children differs from person to person. You can either take an add on credit card on your existing credit card or even give them a new credit card. Ideally, they should use the card responsibly, and it is better that you monitor their usage, at least initially. When they know that you are keeping an eye on their usage, they will take efforts to use the credit card carefully.
Set certain ground rules: Finally, once your children have a credit card, it is important to set certain ground rules. It is better to give them a set of conditions that they have to follow at the time of using the credit card. You can clearly list the scenarios where the credit card can be used. Also, be clear and strict about the monthly spending limit on the card. Ask them how they plan to repay the bills and that you will review the statement together at least for the first few months. Finally, let them know that there will be consequences for violating the rules about credit card usage.
Read More:: MDR Charges on Rupay Credit Card
Using credit cards responsibly can help you build a strong credit score. On the other hand, failing to pay your bills on time, even inadvertently, will hurt your score. If you're the forgetful type, there are a variety of ways to make sure your bills get paid, including signing up for automatic payments from your bank account. If you become overextended and can't afford your credit card payments, some help sources are available, including nonprofit credit counselling organisations.
Most credit scores run from 300 on the low end to 850 at the top. The credit bureau Experian, for example, classifies FICO scores as follows:
Exceptional: 800-850
Very Good: 740-799
Good: 670-739
Fair: 580-669
Poor: 300-579
You can obtain your credit score free of charge from many banks and credit card issuers. Some websites offer free credit scores. Bear in mind that you probably have multiple credit scores, so the one you receive may not be identical to all the rest.
Generally speaking, a debit card won't affect your credit score one way or another because no credit is involved. It's all your money in the first place.
The practice of delayed payments of debts impacts your credit score negatively and significantly drops your credit score.
Interest paid on loans or credit card transactions is not considered when calculating your credit score, so it has no impact on your credit rating.
Bank account details do not reflect on your credit report, and hence, they have no direct impact on your credit score. However, lenders do keep track of your spending, assets, and other information related to your bank account balance to figure out whether you are capable of taking debts.
Yes, individuals without a credit score can get a secured credit card. It is issued against the security of a fixed deposit on which a lien is marked. The credit limit is usually 75% to 90% of the fixed deposit amount.
Download the app now
Download the app from PlayStore
