How Does Credit Card Affect CIBIL Score in India?

Credit Cards are one of the perks brought about by the technological advancement in modern finance. With a simple swipe or a few clicks, you can use your credit card to pay for your purchases. However, using your credit card has a larger impact on your credit score. You must know that when you try to access financial products and services, most banks and institutions consider your credit score. It measures your creditworthiness and capabilities to pay back any borrowed amount. Thus, you must be aware of the credit card's impact on credit score.

Credit cards affect your credit score in the following ways:

Card Repayment History

When using a credit card, it is crucial to manage your repayments carefully. Paying off the full amount on time can boost your credit score, while consistently making only the minimum or missing payments can harm it. Missing payments have a more significant negative impact than paying late. Your repayment history greatly affects your credit score, so always aim to repay what you borrow promptly.

Credit Utilisation Ratio

Another important factor in your credit score is the credit utilisation ratio. But what does that mean? Your credit utilisation ratio is calculated by dividing your total outstanding debt by your total available credit. This ratio is expressed as a percentage. Keeping your credit utilisation ratio below 30% is generally recommended to maintain a healthy credit score. Exceeding this threshold can negatively impact your credit score.

Length of Credit History

If you have not been using a credit card and are considering closing it, you might affect your credit score. The length of your credit history impacts your credit score. Since an old credit card is instrumental in building your credit history, it can help your credit score. It can help a lender gauge how your creditworthiness has evolved over the course of holding the card.

Number of Credit Cards

Multiple credit cards can increase your available credit and help lower your credit utilisation ratio. However, having too many credit cards can negatively affect your credit score. As a general rule, limit yourself to three active credit cards. Excessive cards can lead to repayment difficulties, which may harm your credit score and suggest you rely too heavily on credit.

Now that you know a credit card's effect on credit score, you can select one that meets your requirements. First, evaluate and see why you need a credit card and what need you are hoping to address. Otherwise, take a look at the following:

• Credit Limit: Verify that your credit limit is sufficient for your needs while maintaining a healthy credit utilisation ratio.
• Cashback and Discounts: Many credit cards offer attractive rewards, including cashback, vouchers, and discounts, which can enhance your purchasing experience.
• Annual Fees and Charges: Ensure you pick a credit card only after reviewing the charges. You do not want to end up burning a hole in your pocket by simply paying fees.
• Terms and Conditions: Carefully read the card's terms and conditions, as they will influence your overall experience with the card.
   

If you want an excellent daily-use credit card, you can go right with the HDFC Bank MoneyBack+ Credit Card. Easy to manage, the card also offers discounts, fuel waivers, etc., making managing your monthly expenses much more seamless.

Click here to apply for the MoneyBack+ Credit Card now!

Continue Reading More About What Is A CIBIL Score and Why It Should Matter Here.

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​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals are subject to documentation and verification per the Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.