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How Does a Credit Card Affects the CIBIL Score

Highlights

  • Impact of Credit Card on the Cibil Score.
  • Avoid Some Basic Activities and Increase your Cibil Score.

Many users are in the dilemma, whether using a credit card has any impact on the Cibil Score or not. So, you must clear out your doubts that using a credit card affects the Cibil Score. Therefore, you must use your credit card wisely and smartly. Any misuse of the credit card can deteriorate your Cibil Score and in the future, you’ll be not eligible for any credit facility from financial institutions.

Effects of Credit Card on CIBIL Score

There are many factors that are involved in a credit card for affecting the Cibil Score.

Late Bill Payment

Always pay your credit card bill on time. The bank usually provides a grace period of some days and you have clear out all the debt within that period. Any delay in the payment of bills has a huge impact on the Cibil Score. Therefore, the payment of bill beyond the grace period can decrease your credit score.

Example:- Mr. Mayank has a credit card bill of Rs 100000 generated on 1st Oct 2018 and the bank has given him a grace period of 20 days. If Mr. Mayank makes the payment on 23rd Oct 2018 then his credit score will be affected.

Clearing Only Minimum Dues Repeatedly

You should always clear your full bill amount. Minimum Payment of the bills can decrease your Cibil Score. The bank facilitates a minimum bill amount which is mandatory to be paid. But if you are paying the bill below the minimum amount then it will decrease your Cibil Score.

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Example:- Mrs. Richa has a credit card and the bill generated was of Rs 20000. The bank asked her for the minimum amount of Rs 12000 and Mrs. Richa failed to pay that amount. Then this activity will decrease the credit score. (If you pay the minimum bill amount repeatedly every month then your Cibil Score will start decreasing.)

Repeatedly Using Credit Card Above 50% of Limit

The bank provides a certain limit of using the credit card. So, you must not use the full limit of the card repeatedly because it will affect the Cibil Score. Always try to use the credit card below 50% of the maximum limit.

Example:- Mr. Khan holds many credit cards from different banks. He has a Credit Card with the Maximum limit of Rs 50000. Every month he spends around 27K-40K. So this habit of using credit cards affects the Cibil Score to a very great extent.

Over Limit Usage

There are some financial institutions that provide extra usage limits on the credit card beyond the maximum limit. So using the credit card exceeding the maximum limit also decreases the Cibil Score. Never use your credit card beyond the maximum limit.

Example:- Mr. Ayaz has a credit card with the maximum limit of Rs15000 and being a potential customer the bank has provided him with an over-limit of Rs 2000. In the previous month, he made a transaction of Rs 17000 using the credit card. This kind of behaviour also reduces your Cibil score.

Withdrawal from ATM Machine

Never use your credit card for withdrawing cash from the ATM Machine. You have the Debit card for doing so. Any such activity done with the credit card will impact your credit score and it will start decreasing.

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Example:- One day in a Medical Emergency Ms. Suchita withdraw Rs 2000 from the credit card and later on, she paid the interest on that amount. But this activity will reduce the Cibil Score and it will create a great impact on it.

Summary

Now it is time to wrap up things. Now, you know how does a credit card affect on Cibil score. We have told you every possibility that can reduce your Cibil Score. Your Cibil Score will increase will you’ll avoid all the above-mentioned factors. If you don’t know your current cibil Score then you can easily calculate on the official website of Wishfin.

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