How Can Credit Cards Impact Your Credit Score?
Last Updated : Jan. 3, 2025, 4:13 p.m.
Having a credit card in your wallet helps you to purchase items and pay later for them. You can pay for your purchases instantly. Having a credit card spares you the trouble of carrying cash physically with you. Credit cards have thus made shopping and buying a lot easier. However, using credit cards can have a huge impact on your credit score. Most lending institutions and banks consider your credit score for approving your loan or credit card application. Thus, you must comprehend how credit cards can affect your credit score.
How Does Applying For a Credit Card Impact Your Credit Score?
As part of evaluating your credit card application, the lender conducts a credit check. So, if you apply frequently for a credit card, a huge number of credit enquiries are made which can lower your credit score. While applying for a new credit card, your credit score may drop temporarily. One factor that impacts your credit score on using your credit card is the amount of debt you use from the card limit, which is called the credit utilization ratio. The lesser you use the credit card, the lower your credit utilization ratio is. This is good for your credit score. However, if you apply for a new credit card, it increases your total credit limit. So your CUR lowers. Doing so can enable you to maintain a good credit score.
Closing Credit Card Accounts
You may want to close the credit accounts which you no longer use. However, this could hurt your credit score. The age of your credit card accounts play an important role in determining your credit score. Closing an account that has been in good standing for years lowers the age of accounts in your credit report. This can impact your credit score.
Having High Credit Card Balances
Though credit cards can be a powerful and convenient tool to make online and offline purchases, they can damage your credit score if you use them too much. When your revolving credit card balance is due for a long period, it begins to hurt your credit score. So, try to avoid unnecessary expenses using your credit card to maintain a good credit score.
Making Late Credit Card Payments
One of the most common reasons for a low credit score is not making timely payments of your dues. Your payment history makes up 35% of your overall credit score and is the most influential factor. If you are making late credit card payments or are not making any payments at all, your credit score will reduce. But, if you pay your bills on time, you can maintain a healthy credit score.
Benefits of Having a Good Credit Score
Here are some of the benefits of having a good credit score for credit cards:
A higher credit score boosts your chances of credit card approval.
A high credit score leads to quicker loan approval as lenders are confident of your repayment ability.
When you have a high credit score, lenders will give you a lower interest rate on your loan. Also, you can negotiate for a lower interest rate with lenders.
You will be able to procure a higher loan amount and higher credit limit with a good credit score.
You will be able to get better insurance rates with your credit card.
With high credit scores, you will get access to the best credit cards in the market.
How to Check Credit Score in India?
To check your credit score, you can visit the official Wishfin website, which is the official partner of the renowned credit bureau -Transunion CIBIL. You can know your credit score within a few minutes at Wishfin for free. Follow the steps below to get your free credit score from Wishfin.
Steps to Check CIBIL Score at Wishfin
Step 1: Visit the official website of Wishfin
Step 2: Click on the ‘CIBIL Score’ button to check your credit score for free
Step 3: Enter your first name, middle name, and last name
Step 4: Enter your date of birth
Step 5: Choose your gender
Step 6: Enter your PAN number
Step 7: Specify your monthly income
Step 8: Choose your employment status
Step 9: Enter your employer’s name
Step 10: Enter your email address and mobile phone number.
Step 11: Click ‘Submit’
Frequently Asked Questions (FAQs)
