Credit card and CIBIL score – how are they related
Oct 10, 2022
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You must have heard about the importance of a good credit score in determining the creditworthiness of an individual. A credit score is affected by factors such as your payment record and credit history. The length of your credit history also plays an important role, accounting for 15% of your credit score. Hence, if your existing credit extends for months or years, it significantly changes your credit score.
While it is convenient to apply for a credit card online to handle expenses efficiently, misusing such cards can affect your credit score. A bad credit record can pose a problem when you require a loan, as lenders always evaluate applicants’ credit scores before offering loans.
The solution, however, is not to stay away from credit cards. Responsible credit card holders can effectively manage their expenses and maintain a good credit score. Read on to know how to maintain a good credit score whilst using a credit card.
- Avoid using your credit card to its full capacity and exhaust limits
Regardless of whether your credit card has a high or low credit limit, you must always use it in moderation. Ideally, you must only use up to 40% of your credit limit. A low balance can help you repay the credit card bill conveniently.
- Do not submit too many applications for credit cards
Some lenders might offer a free credit card which does not require cardholders to pay an annual fee. However, this is not a reason to apply for multiple credit cards since doing so can negatively affect your credit score. You must research before choosing a bank and applying for a credit card.
IDFC FIRST Bank credit cards are recommended. They provide several exciting benefits to help you save and earn more. The IDFC FIRST Bank FIRST Wealth Credit Card is one option you can consider. New cardholders can enjoy joining benefits like a welcome voucher worth ₹500 on spending ₹15,000 or more within 90 days of card generation. They can also earn 5% cashback (up to ₹1000) on the transaction value of the first EMI done within 90 days of card generation.
- Get regular updates on your credit score
Checking your credit score will help you understand whether your finances are in order. Checking your credit score online does not affect your credit rating because this is considered a soft inquiry. You can get a free CIBIL score check done from credit bureaus, third-party financial portals, or even from certain banks.
A credit card can be helpful to individuals who require financial assistance. With a credit card, you can get a pre-approved loan, make a high-value purchase, and set up EMI payments to suit your budget. However, you can also use your credit card to boost your credit score. One should remember these points while using a credit card to ensure a healthy credit score.