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Impact of Your Credit Card Activity on Your Credit Score

Credit Cards have become an indispensable part of modern life. There’s no denying that this form of plastic money ensures convenience. It offers you greater purchase power and the freedom to meet your immediate financial requirements while making payments later. The only condition is that you need to maintain a good Credit Card track record. Otherwise, it can impact your credit score. 

Let’s put it this way. Your credit score enables prospective lenders to determine your creditworthiness. Lenders use this score to assess whether or not they should approve any credit product to you. Such products may include a Home Loan, Car Loan, Credit Card, Personal Loan, etc. Your credit score also plays an essential role in providing a favorable interest rate on such credit products. 

Payment History of Your Credit Card

Regarding your credit score, your payment history plays a huge role in it. The fact is that your payment history accounts for about 35% of this score. This makes it essential to make timely payments for your Credit Card bill

Late payments can adversely impact your credit score. Remember that the later you pay, the worse it will be for your score. Also, paying only the minimum amount can harm your score.

But defaulting on your Credit Card payments can hamper your score to a greater extent. If you default to make payments even once, it can single-handedly pull down your credit score. 

Your Credit Utilisation Ratio

The credit utilization ratio compares your total outstanding debt to your total available credit limit. It is the second most important factor that impacts your credit score. It is expressed as a percentage. 

The lesser this percentage, the better it is for your credit score. Your credit utilization ratio should be around 20% to 30%. It will enable you to use your Credit Card without impacting your score. 

If your credit utilization ratio is quite high, such as 70% or more, you can reduce it in two ways:

  • You can request your bank to enhance the maximum credit card limit in India.
  • You can apply for a second Credit Card. 

In both cases, the desired result is to increase the total credit available to you. If you succeed in increasing your credit limit without increasing your debt, your credit utilization ratio will come down.

The Length of Your Credit History

A long-standing Credit Card can have a positive impact on your credit score, more so if you have maintained a good Credit Card track record of making timely payments. 

When you use a Credit Card for a long time, you also have a credit history associated with the card. This history enables lenders to have an idea about how you handle debt.

Suppose you have been using a Credit Card for the last 6 years. Initially, you made a few late payments. But then you rectified your mistake and have made timely payments for the last four years. It will help your credit score to improve. Even lenders will be willing to offer you credit. 

In comparison, consider a Credit Card that you have held for just 6 months. If you have made even one late payment, it will impact your score.

The Number of Credit Cards You Hold

Too much of anything is bad and holds for Credit Cards too. Having two or three active Credit Cards can increase your available credit limit. It can also help reduce your credit utilization ratio.

But having more than three Credit Cards can hurt your credit CIBIL score. That’s because when you have several cards, it can get difficult to keep track of payments on all of them. It can lead to a default in payment and a negative effect on your credit score. 

Also, holding too many Credit Cards can send a wrong signal to a lender. The lender may think that you depend on credit excessively and may not agree to offer you any more credit.

Also Read: What Is Credit Card Over Limit Fee?


Maintaining a good credit CIBIL score is easy if you do a few things without fail. To begin with, use your Credit Card judiciously and always pay your Credit Card bills on time. Also, maintain a low credit utilization ratio. Follow these tips, and you won’t have to worry about your Credit Card activity impacting your credit score. 



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